0166-XCH-Global Offer Cover3 4/4/07 11:31 Page 1

Global Offer

CITIGROUP • UBS 0166-XCH-Global Offer Cover3 4/4/07 11:31 Page 3 This document comprises a prospectus relating to Xchanging plc (the ‘‘Company’’) prepared in accordance with the Prospectus Rules of the Financial Services Authority (the ‘‘FSA’’) made under section 73A of the Financial Services and Markets Act 2000, as amended (‘‘Prospectus Rules’’ and ‘‘FSMA’’ respectively) and has been prepared in connection with the offer to certain institutional and certain other investors described in Part 3: The Global Offer (the ‘‘Global Offer’’) of ordinary shares of 5 pence each (the ‘‘Shares’’). Application has been made to the FSA and to the London Stock Exchange plc (the ‘‘London Stock Exchange’’) respectively for admission of all of the Shares issued and to be issued: (i) to the Official List of the FSA (the ‘‘Official List’’ and ‘‘Admission to Listing’’ respectively) and (ii) to the London Stock Exchange’s main market for listed securities (‘‘Admission to Trading’’). Conditional dealings in the Shares are expected to commence on the London Stock Exchange on 25 April 2007. It is expected that Admission (as defined in Part 9: Definitions and Glossary) will become effective and that unconditional dealings in the Shares will commence on the London Stock Exchange at 8.00 a.m. on 30 April 2007. All dealings in the Shares before the commencement of unconditional dealings will be on a ‘‘when issued’’ basis and will be of no effect if Admission does not take place. Such dealings will be at the sole risk of the parties concerned. No application has been, or is currently intended to be, made for the Shares to be admitted to listing or dealt with on any other stock exchange. The Company and its Directors, whose names appear in the section entitled ‘‘Directors, Company Secretary, Registered Office and Advisers’’ on page 26 of this document, accept responsibility for the information contained in this document. To the best of the knowledge of the Company and the Directors, who have taken all reasonable care to ensure that such is the case, the information contained in this document is in accordance with the facts and contains no omission likely to affect its import. Prospective investors should read the entire document and, in particular, the Risk Factors set out on pages 11 to 20, when considering an investment in the Company.

5APR200719392310 (Incorporated and registered in England and Wales under the Companies Act 1985 with registered no. 5819018) Global Offer of 84,186,874 Shares of 5p each and admission to listing on the Official List and to trading on the London Stock Exchange at an Offer Price of 240p per Share Share capital immediately following Admission Authorised Issued and fully paid Nominal Nominal Value Number Value Number £17,500,000 350,000,000 Shares of 5p each £10,278,920.40 205,578,408

Joint Global Co-ordinators and Joint Bookrunners Citigroup UBS Investment Bank Sponsor Citigroup

Co-Lead Managers Bridgewell Limited Jefferies International Limited

The Company is offering 31,250,000 new Shares (the ‘‘New Shares’’) and the Selling Shareholders are offering an aggregate of 52,936,874 existing Shares (the ‘‘Existing Shares’’) under the Global Offer. The Company will not receive any of the proceeds of the sale of the Existing Shares, all of which will be paid to the Selling Shareholders. The Shares to be issued pursuant to the Global Offer will, following Admission, rank pari passu in all respects with the other issued Shares and will carry the right to receive all dividends and distributions declared, made or paid on or in respect of the issued Shares after Admission. Each of Citigroup, UBS, Bridgewell Limited and Jefferies International Limited (together the ‘‘Underwriters’’) are acting for Xchanging plc and no one else in connection with the Global Offer and will not regard any other person as its customer in relation to the Global Offer and will not be responsible to anyone other than Xchanging plc for providing the protections afforded to their respective customers, nor for providing advice in relation to the Global Offer or any transaction or arrangement referred to in this document. The distribution of this document and the offer of the Shares in certain jurisdictions may be restricted by law. No action has been or will be taken by the Company, the Selling Shareholders or the Underwriters to permit a public offering of the Shares or to permit the possession or distribution of this document (or any other offering or publicity materials relating to the Shares) in any jurisdiction (other than the United Kingdom) where action for that purpose may be required. Accordingly, neither this document nor any advertisement or any other offering material may be distributed or published in any jurisdiction except under circumstances that will result in compliance with any applicable laws and regulations. Persons into whose possession this document comes should inform themselves about and observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities law of any such jurisdictions. The Global Offer and the distribution of this document are subject to the restrictions set out in paragraph 14 of Part 8: Additional Information. Apart from the responsibilities and liabilities, if any, which may be imposed on the Underwriters by FSMA or the regulatory regime established thereunder, none of the Underwriters accepts any responsibility whatsoever for the contents of this document or for any other statement made or purported to be made by it, or on its behalf, in connection with the Company, the Shares or the Global Offer. The Underwriters accordingly each disclaim all and any liability whether arising in tort, contract or otherwise (save as referred to above) which they might otherwise have in respect of such document or any such statement. Investors should rely only on the information in this document. No person has been authorised to give any information or make any representations other than those contained in this document and, if given or made, such information or representations must not be relied on as having been authorised by the Company, the Selling Shareholders or any of the Underwriters. Without prejudice to any obligation of the Company to publish a supplementary prospectus pursuant to section 87G of FSMA and paragraph 3.4 of the Prospectus Rules, neither the delivery of this document nor any subscription or purchase of Shares made pursuant to this document shall, under any circumstances, create any implication that there has been no change in the affairs of the Group since, or that the information contained herein is correct at any time subsequent to, the date of this document. The contents of this document are not to be construed as legal, financial, business or tax advice. Each prospective investor should consult his, her or its own legal adviser, financial adviser or tax adviser for legal, financial or tax advice. In connection with the Global Offer, the Underwriters and any of their respective affiliates acting as an investor for its or their own account(s) may subscribe for or purchase Shares and, in that capacity, may retain, purchase, sell, offer to sell or otherwise deal for its or their own account(s) in such securities, any other securities of the Company or other related investments in connection with the Global Offer or otherwise. Accordingly, references in this document to the Shares being issued, offered, subscribed or otherwise dealt with should be read as including any issue or offer to, or subscription or dealing by, the Underwriters or any of them and any of their affiliates acting as an investor for its or their own account(s). The Underwriters do not intend to disclose the extent of any such investment or transactions otherwise than in accordance with any legal or regulatory obligation to do so.

Notice in connection with the United States, Australia, Canada and Japan This document does not constitute an offer to sell, or the solicitation of an offer to subscribe for or buy, Shares in any jurisdiction in which such offer or solicitation is unlawful and is not for distribution in or into the United States, Australia, Canada or Japan. In particular, the Shares offered by this document have not been and will not be registered under the Securities Act, under the applicable state securities laws of the United States or under the applicable securities laws of Australia, Canada or Japan and, subject to certain exceptions, may not be offered or sold, directly or indirectly, in or into the United States, Australia, Canada or Japan, or to or for the account or benefit of or any person resident in Australia, Canada or Japan. The Underwriters may arrange for the offer and sale of Shares in the United States only to persons reasonably believed to be ‘‘Qualified Institutional Buyers’’ (as defined in Rule 144A of the Securities Act) in reliance on the exemption from the registration requirements of the Securities Act provided by Rule 144A or another exemption from, or transaction not subject to, the registration requirements of the Securities Act. Prospective purchasers are hereby notified that the Selling Shareholders may be relying on the exemption from the provisions of Section 5 of the Securities Act provided by Rule 144A. For a description of these and certain further restrictions on the offer, sale and transfer of the Shares and distribution of this document, see paragraph 14 of Part 8: Additional Information. No US federal or state securities commission or regulatory authority has approved or disapproved of the Shares or passed upon the adequacy or accuracy of this document. Any representation to the contrary is a criminal offence in the United States. The Shares are subject to the restrictions on resale and transfer contained in the section entitled ‘‘Transfer Restrictions’’ in paragraph 14 of Part 8: Additional Information. By subscribing for or purchasing any Shares, you will be deemed to have made certain acknowledgements, representations and agreements as described in that section of this document. You may be required to bear the financial risks of investing in the Shares for an indefinite period of time. The discussion in paragraph 13 in Part 8: Additional Information under the heading ‘‘Taxation of US Resident Shareholders’’ is not intended or written to be used, and cannot be used by any person, for the purpose of avoiding United States federal tax penalties, and was written to support the promotion or marketing of the Global Offer. Each prospective investor should seek advice based on its particular circumstances from an independent tax adviser. The Global Offer and the associated tax strategies are not confidential, proprietary or exclusive. Notwithstanding anything to the contrary herein, there is no limitation on the disclosure by any recipient of this document of the tax treatment or tax structure of the Global Offer described therein.

Notice in connection with Member States of the European Economic Area This document has been prepared on the basis that all offers of Shares will be made pursuant to an exemption under the Prospectus Directive, as implemented in member states of the European Economic Area (‘‘EEA’’), from the requirement to produce a prospectus for offers of Shares. Accordingly any person making or intending to make any offer within the EEA of Shares which are the subject of the Global Offer contemplated in this document should only do so in circumstances in which no obligation arises for the Company, the Selling Shareholders or any of the Underwriters to produce a prospectus for such offer. Neither the Company, the Selling Shareholders nor the Underwriters have authorised, nor do they authorise, the making of any offer of Shares through any financial intermediary, other than offers made by Underwriters which constitute the final placement of Shares contemplated in this document.

No Incorporation of Website Information The contents of the Group’s website or any website directly or indirectly linked to the Group’s website do not form part of this document.

References to Time and Other Important Information All references to time are references to London time. Other important information can be found on pages 21 and 22. CONTENTS

Summary Information ...... 5 Risk Factors...... 11 Other Important Information ...... 21 Presentation of Financial and Other Information ...... 23 Global Offer Statistics...... 25 Expected Timetable For The Global Offer ...... 25 Directors, Company Secretary, Registered Office And Advisers ...... 26 Part 1: Information On The Group...... 27 1. Company Overview ...... 27 2. History Of The Group ...... 27 3. Key Strengths...... 28 4. Growth Strategy ...... 31 5. Market Environment ...... 32 6. Business Model...... 34 7. Operating Structure ...... 37 8. Sales Methodology ...... 43 9. Execution Approach ...... 43 10. Information Systems ...... 48 11. Intellectual Property ...... 48 12. Data Protection ...... 49 13. Dividend Policy...... 49 Part 2: Directors, Senior Managers, Employees And Corporate Governance...... 50 1. Directors...... 50 2. Senior Managers...... 52 3. Compensation ...... 53 4. Employees ...... 54 5. Corporate Governance ...... 54 6. Model Code ...... 56 Part 3: The Global Offer ...... 57 1. The Global Offer ...... 57 2. Reasons For The Global Offer And Use Of Proceeds ...... 57 3. Allocation And Pricing...... 57 4. Over-Allotment And Stabilisation ...... 58 5. Dealing Arrangements...... 58 6. CREST...... 59 7. Underwriting Arrangements And Lock-Up Arrangements ...... 59 Part 4: Operating And Financial Review...... 62 Part 5: Accountants’ Reports and Financial Information ...... 85

3 Part 6: Unaudited Pro Forma Financial Information ...... 184 Part 7: Regulation ...... 188 1. Regulated Entities In The Group...... 188 2. Regulation Applicable To Customers Of The Group In Relation To The Outsourcing Of Their Activities ...... 194 Part 8: Additional Information...... 195 1. Responsibility...... 195 2. Information ...... 195 3. Share Capital ...... 195 4. Memorandum And Articles Of Association...... 203 5. Other Directorships ...... 212 6. Directors’ And Other Interests ...... 215 7. Directors’ Service Agreements And Letters Of Appointment ...... 218 8. Employee Share Plans...... 220 9. Property ...... 227 10. Subsidiaries ...... 227 11. Pensions ...... 228 12. United Kingdom Taxation...... 236 13. Taxation Of US Resident Shareholders ...... 238 14. Securities Laws ...... 240 15. Working Capital ...... 244 16. Significant Change ...... 244 17. Litigation ...... 244 18. Material Contracts ...... 244 19. Selling Shareholders ...... 253 20. Related Party Transactions...... 254 21. Consents ...... 254 22. General ...... 254 23. Documents For Inspection...... 255 Part 9: Definitions And Glossary...... 256

4 SUMMARY INFORMATION The following summary information should be read as an introduction to this Prospectus. Any decision by a prospective investor to invest in Shares should be based on consideration of the document as a whole and not solely on this summarised information. Following the implementation of the relevant provisions of the Prospectus Directive (Directive 2003/71/EC) in each member state of the European Economic Area, civil liability attaches to those persons who are responsible for the summary, including any persons responsible for any translation of the summary, but only if this summary is misleading, inaccurate or inconsistent when read together with the other parts of this document. Where a claim relating to the information contained in this document is brought before a court in a member state of the European Economic Area, the claimant may, under the national legislation of that member state where the claim is brought, be required to bear the costs of translating this document before legal proceedings are initiated.

1. INFORMATION ON THE GROUP The Group is one of the leading international, pure play BPO providers. It has more than 3,800 employees operating in seven countries and services blue-chip customers in 34 countries, with a focus on the UK and Continental Europe. The Group provides industry specific processing and other services to the banking and insurance industries and also provides procurement, finance and accounting and human resources services to customers across industries. The Group’s customers include Aon Limited (‘‘Aon’’), BAE Systems, Boots the Chemists, Citibank, Deutsche Bank, the International Underwriting Association (‘‘IUA’’), Lloyd’s, National Australia Group, Sal. Oppenheim, United Biscuits and University Hospital Birmingham. The Group performs complex, large-scale processing on behalf of its customers, providing them with better service at a lower cost than when these functions were performed internally. Operating customers’ non-core functions is the Group’s core business. Examples of the Group’s services in 2006 included: settling an estimated 15% of securities transactions in the German market, settling £11.4 billion of insurance claims in the Lloyd’s insurance market, providing human resource and payroll services and support to 1.5 million staff and their dependants, procuring £390 million of indirect spend and paying over £800 million of invoices. The Group offers a full suite of BPO services including large-scale partnering, outsourcing, software products and solutions, Straight Through Processing (‘‘STP’’) and business support. At the heart of the Group’s business strategy is a unique partnering approach. The Group takes over a customer’s back office and creates a jointly owned business with its customer called an ‘‘Enterprise Partnership’’ or ‘‘EP’’. Enterprise Partnerships provide the Group with scalable platforms from which it can also offer its services to other customers. A key component of the Group’s partnering and procurement outsourcing arrangements is its ‘‘gain-share’’ approach. This gain-sharing approach is a step beyond that of a traditional outsourcing arrangement where a customer outsources services in return for payment of an agreed fee. The nature of the gain-sharing relationship provides transparency for all parties, shortens decision-making time and engenders an environment of trust. The Group uses a distinctive execution approach to deliver its services in a standardised and repeatable way. The Group delivers its services through a balance of on-shore and offshore operations, seeking to provide the lowest cost solution consistent with its customers’ requirements. The Group recorded revenues of £393.5 million for the year ended 31 December 2006, an increase from £350.0 million in 2005 and £254.1 million in 2004 (a 2004-2006 CAGR of 24%).

2. KEY STRENGTHS The Group’s key strengths include: Strong competitive position—the Group believes its unique partnering approach and full suite of BPO offerings provide a competitive advantage and enable the Group to manage complex processes across a range of industries.

5 High growth markets—according to IDC, the combined value of the BPO markets in the Western European, Asian Pacific and US Regions (excluding industry-specific BPO revenue) was approximately US$49 billion in 2005 and is forecast to continue to grow at a CAGR of 13.8% from 2005 to 2010.(1) High revenue visibility—due to the long term nature of the Group’s contracts and the relationships it builds with major customers. Established profitability with the opportunity for further margin enhancement—demonstrated by achieving a 67% CAGR of XPAT from 2004-2006, with XPAT margins increasing from 2.4% in 2004 to 4.4% in 2006. Proven entrepreneurial management—the management team has extensive experience in executing complex BPO contracts.

3. STRATEGY The Group has a clear strategy of: Expanding existing business platforms—through offering processing services and products to new and existing customers, based on the Group’s in-depth industry and domain expertise. Developing new service platforms via partnerships—entering into additional partnerships across new industries and new geographic areas to develop platforms undertaking new processing functions. Achieving a low cost production position—providing the Group’s services for the lowest cost possible consistent with its customers’ needs and constraints. Making selective acquisitions—to enhance the expertise or the scale of existing operations (either vertically, geographically, or in terms of technological capability). Buying out partners’ shares in EPs—where appropriate, the Group seeks to buy out partners’ interests in EPs.

4. SUMMARY FINANCIAL INFORMATION The table below sets out the Group’s summary financial information for the periods indicated. The data has been extracted from Part 5: Accountants’ Reports and Financial Information of this document which has been prepared in accordance with IFRS as adopted by the European Union (‘‘IFRS’’). Summary Financial Information Year ended 31 December 2004 2005 2006 £ (in millions) Revenue...... 254.1 350.0 393.5 Cost of sales ...... (222.8) (302.6) (348.7) Gross profit...... 31.3 47.4 44.8(2) Administrative expenses (pre-exceptional items) ...... (12.8) (13.2) (13.7) Operating profit (pre-exceptional items)...... 18.5 34.2 31.1(2) Net exceptional items...... (2.2) — (6.9) Operating profit ...... 16.3 34.2 24.2 Net finance (costs)/income ...... (0.3) (0.3) 0.7 Profit before tax...... 16.1 33.9 24.9 Taxation...... (5.7) (11.3) (7.5) Profit for the year...... 10.4 22.6 17.4 Profit attributable to minority interests...... 5.4 10.8 6.7 Profit attributable to equity holders of the Group ...... 5.0 11.8 10.7

(1) Source: IDC—Doc #2014178, Doc #BP01N, and Doc #AP224107N. (2) The results of the business were affected by a number of factors during 2006 including investment costs in India and sales infrastructure, and transferring the BAE Systems procurement contract from a profit share mechanism to a gain-share mechanism, all of which suppressed the gross profit and operating profit of the Group.

6 Key Performance Indicators (‘‘KPIs’’) The Directors use two non-GAAP measures as KPIs (XEBIT and XPAT) to monitor the business and the results generated for the Group’s shareholders. The Group believes these provide important measures of historical performance due to the Group’s significant minority interests. XEBIT is the Group’s shareholders’ share of the operating profit (pre-exceptional items), following the add back of certain non-cash items(1). XPAT is the Xchanging shareholders’ share of the profit after tax (pre- exceptional items), following the add back of certain non-cash items(2). Revenue, XEBIT and XPAT are set out in the following table:

Year ended 31 December 2004–2006 2004 2005 2006 CAGR £ (in millions) Revenue...... 254.1 350.0 393.5 24% XEBIT ...... 9.0 19.7 22.2 57% XPAT...... 6.1 13.6 17.1 67%

XEBIT XPAT

25.0 20.0 20.0 15.0 15.0 £m

£m 10.0 10.0 5.0 5.0 0.0 0.0 2004 20055APR200721535620 2006 2004 2005 5APR2007215358842006 These KPIs are not intended to comply with SEC reporting requirements. Compliance with such requirements would require the modification or exclusion of certain financial measures, including XEBIT and XPAT and their related ratios and the presentation of certain other financial information not included herein. The tables below show the reconciliation of the Group profit to XEBIT and XPAT: Year ended 31 December 2004 2005 2006 £ (in millions) XEBIT...... 9.0 19.7 22.2 Adjusted operating profit attributable to minority interests 10.0 15.2 10.1 Adjusted operating profit ...... 19.0 34.9 32.3 Less — Net exceptional items(3) ...... (2.2) — (6.9) — Other add backs(4) ...... (0.5) (0.7) (1.2) Operating profit ...... 16.3 34.2 24.2

(1) Add backs to operating profit comprise amortisation of intangible assets previously unrecognised by an acquired entity and share based payment charges. (2) Add backs to profit for the year comprise amortisation of intangible assets previously unrecognised by an entity acquired by the Group, share based payment charges, imputed interest on the historic financing structure of the Group which will fall away on Admission, imputed interest on put options and the related tax thereon. (3) Net exceptional items comprise exceptional costs of £6.9 million and an exceptional gain of £4.7 million for 2004 and exceptional costs of £6.9 million for 2006. (4) Add backs to operating profit comprise amortisation of intangible assets previously unrecognised by an acquired entity and share based payment charges.

7 Year ended 31 December 2004 2005 2006 £ (in millions) XPAT...... 6.1 13.6 17.1 Adjusted profit after taxation attributable to minority interests ...... 6.0 10.8 7.3 Adjusted profit after taxation ...... 12.1 24.4 24.4 Less — Net exceptional items...... (2.2) — (6.9) — Other add backs(1) ...... (1.7) (2.1) (2.5) Tax effect of above...... 2.2 0.3 2.4 Profit for the year...... 10.4 22.6 17.4

5. CURRENT TRADING AND PROSPECTS In early 2007, the Group completed the buy-out of BAE Systems’ interests in the Xchanging Human Resources Services (‘‘XHRS’’) and Xchanging Procurement Services (‘‘XPS’’) partnerships for £57 million (a net cash price of £54 million). This will allow the Group to achieve full strategic control over the operations of these partnerships and, in the Group’s opinion, will lead to enhanced contribution from those businesses. With respect to current trading and the prospects for the remainder of 2007, trading remains in line with management expectations. The Group anticipates further growth through additional revenue from existing operations, new EPs and acquisitions.

6. DIVIDEND POLICY The Company intends to adopt a dividend policy which reflects the growth prospects and cash flow generation of the Group, whilst maintaining an appropriate level of dividend cover.

7. MAJOR SHAREHOLDER On Admission, General Atlantic will control approximately 34.3% of the rights to vote at general meetings of the Group (or approximately 28.2% if the Over-allotment Option is exercised in full). The relationship deed between General Atlantic and the Company, includes an undertaking from General Atlantic to exercise voting rights in relation to the Group to ensure that the Group is capable of carrying on its business independently of General Atlantic. If General Atlantic holds 30% or more of the Group’s Shares following Admission, any further increase in its interest in Shares will be subject to the provisions of Rule 9 of the Takeover Code.

8. LOCK-UP ARRANGEMENTS Each of the Company, the Selling Shareholders (other than BAE Systems which has agreed to sell all of its Existing Shares as part of the Global Offer), the Directors and certain of the Senior Managers has agreed to certain lock-up arrangements.

9. SUMMARY OF THE GLOBAL OFFER Under the Global Offer, the Company will issue 31,250,000 New Shares and the Selling Shareholders will sell 52,936,874 Existing Shares. In addition, General Atlantic has granted UBS, as stabilising manager, the Over-allotment Option, which is exercisable in whole or in part during the period commencing on the date of publication of the Offer Price and ending 30 days thereafter, to purchase, or procure purchasers for, up to an additional 12,628,031 Existing Shares, inter alia, to cover over-allotments made (if any) in connection with the Global Offer and/or to cover short positions relating to stabilisation transactions. The Global Offer is being made by way of an offering of Shares in the United States only to QIBs in transactions meeting the requirements of Rule 144A or other transactions exempt from the

(1) Add backs to profit for the year comprise amortisation of intangible assets previously unrecognised by an entity acquired by the Group, share based payment charges, imputed interest on the historic financing structure of the Group which will fall away on Admission, imputed interest on put options and the related tax thereon.

8 registration requirements of the Securities Act and to persons in the United Kingdom and the rest of the world in offshore transactions meeting the requirements of Regulation S. It is expected that Admission will take place and unconditional dealings in the Shares will commence on the London Stock Exchange at 8.00 a.m. on 30 April 2007. Prior to Admission, it is expected that dealings in the Shares will commence on a conditional basis on the London Stock Exchange at 8.00 a.m. on 25 April 2007.

10. REASONS FOR THE GLOBAL OFFER AND USE OF PROCEEDS The Global Offer, Admission and issue of New Shares will allow the Group to fund its future growth through establishing new Enterprise Partnerships, developing its existing businesses and selectively acquiring businesses. The Group believes it will also further raise the profile of the Group and assist in incentivising employees. In addition, the Selling Shareholders will realise part of, and in the case of BAE Systems all of, their investment in the Group. Pursuant to the Global Offer, which is fully underwritten subject to the terms of the Underwriting Agreement, by the Underwriters, the Group is expected to receive approximately £75 million from the subscription of New Shares, net of underwriting commissions and other fees and expenses of approximately £65 million(1). The Group will not receive any proceeds from the sale of Existing Shares by the Selling Shareholders.

11. RISK FACTORS The Group’s business is subject to certain risks including but not limited to the following: The Group could fail to accurately forecast its ability to deliver outsourcing services efficiently. Contracts may not be implemented within appropriate timescales or could be implemented poorly and fail to deliver savings to the customers. Volumes anticipated under contracts may not be achieved or the nature of required services may change. Growth is dependent on attracting new customers. The scale of major contracts requires long lead time and significant input of resources. Customers may have rights to ‘‘put’’ their shares in the EPs under certain circumstances. Some agreements give customers the right under certain circumstances to ‘‘call’’ the Group’s shares in EPs for no or nominal consideration. Contracts may be terminated before their full term or may not be renewed. The Group is exposed to operational risks after the establishment of its EPs. Customers may seek to dispose of their shares in EPs. It may take several months before the Group begins to recognise revenue from major procurement contracts. A number of the Group’s major contracts contain provisions for benchmarking services against the market for comparable services. The Group is dependent on a few major customers and, in particular, on customers in the banking and insurance industries. The Group faces competition from a variety of sources. The Senior management team and other key team members are critical to its continued success. Attracting skilled personnel is competitive and the Group may fail to attract enough such personnel to support its operations. With operations in several countries, the Group is exposed to a variety of employment issues. The Group has two large defined benefit pension schemes that are currently underfunded on an IAS 19 basis.

(1) This assumes that the full discretionary fee is paid to the Underwriters.

9 The Group could be exposed to a certain amount of volatility associated with pension deficits and employer contributions. The Group is exposed to risks associated with pensions schemes run by other organisations. The Group could be subject to risks posed by the Pensions Act 2004. The BPO industry is relatively new and its growth may not be sustained. The Group may be unable to effectively manage its rapid growth. Disruptions to customers’ businesses or inadequate service, may cause claims for damages that insurance coverage may be inadequate to cover. The Group is liable to its customers for damages caused by unauthorised disclosure of sensitive and confidential information. Business may be adversely affected by disruptions to IT systems. The Group may fail to develop systems, technology and products that satisfy customer’s needs. Third-party suppliers are key to business operations; quality issues or supply disruptions may negatively affect the Group. The Group may be exposed to changes in law and regulations, which could increase regulatory costs and prevent services from being provided. The Group may be adversely affected by negative reactions to offshore outsourcing. Finding suitable acquisition opportunities may be difficult. The international nature of the Group’s business exposes it to risks. The Group may be unable to protect its proprietary rights. A significant change in certain exchange rates may have an adverse effect on the Group. By virtue of its significant shareholding, General Atlantic may be able to influence shareholder decisions. Substantial future sales of Shares could impact the market price of the Shares. There has been no public trading market for the Shares and an active trading market may not develop. The Shares may be subject to market price volatility and the market price for the Shares may decline disproportionately in response to adverse developments unrelated to the Group’s operating performance. The Company may not be able to pay dividends. Exchange rate fluctuations may expose an investor whose principal currency is not pounds sterling to foreign currency rate risk. US and other non-UK holders of shares may not be able to exercise pre-emption rights. There is doubt as to the enforceability in England and Wales of claims based on federal securities laws of the United States.

10 RISK FACTORS Before investing in Shares, prospective investors should carefully consider the following risk factors in addition to the other information contained in this document. If any of the risks described below were to occur, it could have a material adverse effect on the Group’s business, results of operations or financial condition. If this were to lead to a decline in the trading price of the Shares, prospective investors may lose all or part of their investment. The risks and uncertainties described below are not the only ones faced by the Group. Additional risks and uncertainties not presently known or currently deemed by the Directors to be immaterial may also have a material adverse effect on the Group’s business, results of operations or financial condition. These risks are not set out in any particular order of priority. This document also contains forward-looking statements that involve risks and uncertainties. See ‘‘Forward- Looking Statements’’ on page 21 of this document. The Group’s actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks faced by the Group set out below and elsewhere in this document. Prospective investors should read this document as a whole and not rely solely on the information set out in this section. The financial information set out in this section has been extracted without material adjustment from Part 5: Accountants’ Reports and Financial Information and from Part 6: Unaudited Pro Forma Financial Information. Prospective investors should read this section in conjunction with Part 5: Accountants’ Reports and Financial Information and Part 6: Unaudited Pro Forma Financial Information and the other detailed information contained elsewhere in this document.

Risks relating to the Group’s business Failure by the Group to accurately forecast its ability to deliver outsourcing services efficiently could result in losses under major contracts. The Group’s major contracts with its customers provide for the establishment by the parties of a cost ‘‘baseline’’—an estimate of the pre-outsourcing cost incurred by the customer to provide the relevant goods or services. These baselines are the result of intensive studies undertaken by the Group, generally over a number of months and are agreed with the customer. The baseline costs form the ‘day one service charge’ to be paid by the customer for the outsourced services. Based on this, there is a projected cost savings profile which is shared with the customer. The Group commits to the customer to deliver at least part of this cost savings profile, by means of guaranteed service charge discounts. If the Group underestimates the baseline costs or if it overestimates achievable savings, it may incur losses. Discounts that increase over time will require either further increases in efficiency or the addition of third party revenues in order to maintain profitability, neither of which may be attainable. Any of the foregoing could have a material adverse affect on the Group’s results of operations, financial condition and cash flows.

The Group may not be able to implement its contracts within appropriate time frames or could implement them poorly and fail to deliver savings to the customer. The gain-sharing model, used in certain of the Group’s major contracts, requires the Group to generate savings from the baseline estimate of the pre-outsourcing cost incurred by the customer. If the Group encounters difficulties or delays in implementing the methodologies through which the Group plans to generate the required savings, these savings may be delayed or may never materialise. Such delays or failures may have a material adverse effect on the Group’s business, results of operations, financial condition, cash flows and on its reputation as an outsourcing provider.

The Group may not achieve volumes anticipated under its contracts or the nature of required services may change over the course of the contract. The service fees paid to the Group under certain of its major contracts may be affected by the volume of transactions or services that are provided or undertaken pursuant to the contract. Under these contracts the customer typically pays a fixed fee and grants the Group exclusivity in providing particular goods or services but generally does not commit to a minimum transaction or expenditure level. Therefore, actual volumes achieved under the contracts may be materially less than anticipated volumes when the contract was agreed and there may be no right of recovery under the contract for any additional expense incurred. Further, the customers’ needs may change during the course of the contracts (EP service contracts generally last 10 to 12 years) and it may be that alterations are required to meet those needs. If customers do not require the volume of services or transactions anticipated under the contracts, it will limit the Group’s ability to achieve its own targets and could result in lower than anticipated profitability of the contracts.

11 The Group’s growth is largely dependent on its ability to attract new customers, whilst the scale of the Group’s major contracts requires long relationship building and development lead times and significant input of Group resources. The Group’s growth is dependent upon its ability to attract additional EP or major Outsourcing customers. If the Group does not succeed in continuing to attract and retain such customers, it could have a material adverse affect on its results of operations, financial condition and cash flows. Moreover, there can be no guarantee that the Group will continue to achieve its historic rates of growth. The development of the large and complex arrangements that the Group targets requires time and expenditure by the Group and its personnel. Potential customers may be reluctant to turn over important back-office operations to a third party and may first require the Group to build a relationship of trust with them. Group personnel work closely with potential customers over several months (or longer) to create and refine potential arrangements and to alleviate possible concerns about reliability of the services to be provided. Following preliminary approval of an arrangement by the potential customer, further substantial planning and development are necessary and typically require the devotion of expert resources by the Group. After preliminary approval of an arrangement by a customer, there is a risk that arrangements may be aborted or delayed by customers due to factors over which the Group has little or no control (such as the performance of the customers’ underlying businesses or changes in customers’ budgetary priorities) or as a result of the parties failing to agree detailed commercial terms. The failure to convince potential customers of the viability of arrangements, or the failure to successfully conclude such arrangements once tentatively approved can result in unrecovered costs and impede the growth of the Group.

Some of the Enterprise Partnership agreements give the partner rights, under certain circumstances, to ‘‘put’’ their shares to the Group creating a cash requirement for the Group. Under some of the Group’s contracts for its Enterprise Partnerships, the partners have the right, in defined circumstances or at certain times, to put their shares in the EP to the Group based on a valuation in accordance with specified rules, and in some cases these valuations are subject to minimum values. The valuations are not capped and could place significant cash demands upon the Group.

Some of the Enterprise Partnership agreements give the partner the right, under certain circumstances, to ‘‘call’’ the Group’s shares for no or nominal consideration. Under some of the Group’s contracts, in circumstances such as insolvency, material default, performance failure, serious regulatory interventions or change of control of the Group, the partner may (in some cases up to a specified point in the contract, often the fifth anniversary), call for the transfer of the Group’s shares in the Enterprise Partnership for a nominal value. This would lead to the loss by the Group of its entire shareholding interest in and the associated revenue from that Enterprise Partnership. In these circumstances, the assets and employees of the EP remain within the EP (now wholly-owned by the EP partner) and the Group’s contractual commitments to provide people, software and intellectual property (apart from certain licences) fall away and any assets and employees provided under these arrangements remain with the Group. Any such transfer would have a material adverse effect on the Group’s results of operations, financial condition and cash flows.

The Group’s contracts may be terminated before their full term or may not be renewed. The service contracts provided by the Group’s Enterprise Partnerships to its partners have terms in the range of 10 to 12 years. The Group’s major Outsourcing contracts generally have terms in the range of five to seven years. These service contracts and Outsourcing contracts may include rights for the customer to terminate for cause, change of control and convenience at or after specified times. Where termination for convenience is permitted, the customer must pay a termination fee. In addition to the separately identified call and put options in respect of the Group’s shares in its Enterprise Partnerships, termination of service contracts would reduce the revenue of the Enterprise Partnerships and may result in irrecoverable costs and assets, contracts and staff surplus to operational requirements. In view of the Group’s short operational history, none of the Group’s major long-term contracts has reached maturity. In XIS and XCS, the principal services agreements are divided into individual customer services contracts for the Lloyd’s market and the Companies market and all such contracts have an indefinite term and are capable of termination on 12 months’ notice and not less than three months’ notice respectively.

12 The Group is exposed to operational risks after the establishment of its EPs. The establishment of an Enterprise Partnership results in the assumption of the normal operational risks of a corporate organisation, including responsibility for employees transferred from the customers’ internal operations to the Enterprise Partnership, compliance with regulatory requirements, dealings with suppliers, leasing obligations for the entity’s premises, overhead and certain pensions liabilities. In the insurance and securities processing EPs, the Group also has responsibility for executing complex, high value and repetitive transactions and processes and, in certain circumstances, for losses arising from settling errors. These operational risks, including systemic processing failures could have a material adverse effect on the entity, and the Group’s business, results of operations, financial condition and cash flows.

Partners may seek to dispose of their shares in EPs creating a cash requirement for the Group. Enterprise Partnership contracts give the customers the right to transfer their shares after an initial period. There are normally pre-emption rights in favour of the Group if the customer intends to sell its shares to a third party. The purchase of shares in these circumstances, if the pre-emption rights are exercised, could place cash demands upon the Group.

Following customer approval of a major procurement contract, it may take several months before the Group begins to recognise revenue from that contract. When the Group has entered into a major procurement contract it may take a number of months to complete adapting and implementing the appropriate platforms, systems, IT support, baselining and methodologies. Unanticipated regulatory, technological, legal, design-related or other issues can delay the commencement of operations. The Group does not recognise revenue from these contracts until the implementation phase has been completed and operations have begun and this could have an adverse effect on the Group’s prospective results of operations, financial condition and cash flows.

Many of the Group’s major contracts contain provisions for benchmarking the Group’s services against the market for comparable services. The Group’s major contracts often contain provisions for benchmarking services against the market for comparable services. The implementation of such benchmarks could lead to reduced charges for services or to increased costs of providing the services, which could have a material adverse effect on the Group’s business, results of operations, financial condition and cash flows.

The Group is dependent on a few major customers and, in particular, on customers in the banking and insurance industries. For the year ended 31 December 2006, 66% of the Group’s revenue was attributable to its ten largest customers and 54% was attributable to its three largest customers: BAE Systems, Deutsche Bank and Aon. After contracts are entered into, the deterioration of relations with, or the termination of any major contracts by, the Group’s significant customers could have a material adverse effect on the Group’s operating performance. Financial difficulties experienced by any of its significant customers could have a significant impact on the Group. In addition, should any of the Group’s significant customers divest large portions of their operations, experience consolidation or a change of control, the functions outsourced by such customer may face significant alteration. This may lead to reductions or changes of the scope of, or termination of, major contracts. A substantial portion of the Group’s customers is concentrated in the banking and insurance industries. In the year ended 31 December 2006, 58% of the Group’s revenue was attributable to customers in those industries. The Group’s revenue is thus largely dependent on revenue from customers in these industries and a reduction in demand from these industries could have an adverse impact on the Group’s results of operations.

The Group faces competition from a variety of sources. The BPO industry is new and the Group faces competition from other outsourcing companies, processing oriented service providers, service companies that focus on providing business services from relatively low-cost geographic areas (principally India) and large IT and consulting companies with BPO divisions. Some of these companies have financial resources greater than those of the Group, may have access to different technologies or experience from the Group, or may have scales of operations (either in particular

13 countries or overall) that provide advantages to them. The Group can provide no assurance that it will be able to compete successfully in the future against present competitors or new entrants from new sources or that competitive pressures will not have a material adverse effect on its business, financial condition or results of operations.

The Group’s senior management team and other key team members in its various operations are critical to its continued success. The Group’s future success depends on the continued service and performance of the members of its management team and other key team members across its various operations. These personnel possess technical and business capabilities, including domain expertise, that are difficult to replace quickly. There is competition for experienced management and the Group may not be able to retain its key personnel or recruit qualified replacements. The loss of key members of the Group’s management or other key team members could have a material adverse effect on the Group’s business, results of operations, financial condition and cash flows.

Attracting skilled personnel is competitive and the Group may fail to attract enough such personnel to support its operations and to continue its business. The Group’s business relies on skilled employees, and its success depends to a significant extent on its ability to attract, train and retain employees with technical and industry expertise in the business process outsourcing industry. The Group’s failure to attract, train and retain personnel with the qualifications necessary to fulfil the needs of its existing and future customers or to successfully assimilate and train new employees in sufficient numbers could have a material adverse effect on its business, results of operations, financial condition and cash flows.

The Group maintains operations in several countries, therefore it is exposed to a variety of employment issues and may be adversely affected by changes in employment law in any of the regions or countries in which it operates. The Group operates in France, Germany, India, Malaysia, the UK, the US and Australia, and is subject to a range of employment regulations. As a result of employment regulations in these countries (and in particular in France, Germany, India and the UK), the Group could have difficulty eliminating redundant employees or may be subject to pension obligations, which could materially affect the Group’s results of operations.

The Group has two large defined benefit pension schemes in the UK that are currently underfunded on an IAS 19 basis and an unfunded defined benefit arrangement in Germany supported by a contractual trust agreement. The deficits in the Rebus Scheme and LPC Scheme are described in more detail in paragraph 11 of Part 8: Additional Information. The total liabilities for the two pension schemes as at 31 December 2006 on an IAS 19 basis were £91.6 million with assets of £72.2 million and a corresponding deficit of £19.4 million. Assets are held in a contractual trust arrangement (‘‘CTA’’) in respect of the German arrangements, assessed as at 31 December 2006 at £47.7 million against pension liabilities assessed at £50.2 million. There is also a provision of £8.0 million on the Xtb balance sheet for long service and early retirement arrangements. The German arrangements are described in more detail in paragraph 11.4 of Part 8: Additional Information. If the Group were required to fund the entirety of the deficit over a shorter period than is currently envisaged for any of the schemes, it could place unanticipated cash demands on the Group and could have a material adverse effect on the Group’s financial condition and cash flows.

The Group could be exposed to a certain amount of volatility associated with pension deficits and employer contributions and could be faced with a significant cash flow impact in relation to its pension schemes. The nature of a defined benefit pension scheme and the investment strategy adopted means that the Rebus Scheme and LPC Scheme can create volatile cash, balance sheet and profit and loss impacts. In particular the funding level of the schemes for both cash and accounting purposes is sensitive to changes in a wide range of factors, including investment returns, discount rates for valuing liabilities, life expectancy, inflation and salary growth. As a result, it is not possible to predict future funding levels, deficit repayment periods or employer cash contribution obligations and accounting charges. It is possible that these external market factors could materially affect the Group’s cash flow and/or balance sheet and distributable

14 reserves. A new scheme-specific funding regime for defined benefit schemes has been introduced and will first impact the Rebus Scheme and the LPC Scheme at their next valuations (due at 1 April 2007 and 1 July 2007 respectively). There is a risk that the assumptions adopted to address the scheme-specific funding regime are likely to be more conservative than those used in the previous valuations resulting in an increase in the deficits. Further, the trustees may seek a shorter period for repayment of any deficits disclosed. If the Rebus Scheme or the LPC Scheme were to be wound-up, the trustees would have the power under section 75 of the Pensions Act 1995 to claim a debt equal to the deficit in the schemes on a buyout basis against the employers of the scheme and certain former employers. As at 1 May 2006, the actuary of the Rebus Scheme estimated that if a section 75 wind-up debt were to be triggered it would be approximately £75 million. As at 1 July 2004, the actuary of the LPC Scheme estimated that if a section 75 wind-up debt were to be triggered it would be approximately £20 million. If the Group were required to fund the entirety of the section 75 wind-up debt for either of the schemes, it would place unanticipated cash demands on the Group and would have a material adverse effect on the Group’s financial condition and cash flows.

The Group is exposed to risks associated with pension schemes run by other organisations. Some of the Group’s employees participate in defined benefit pension schemes run by BAE Systems and Lloyd’s. Although contractual protection is in place for the benefit of the relevant employers and the wider Group with a view to reducing the risk of the Group becoming liable to contribute towards deficits in those schemes, the structure of UK pensions legislation is such that this possibility cannot be excluded altogether. The result is that if either BAE Systems or Lloyd’s were unable to support its own pension scheme, the Group could be called upon to contribute to those schemes’ deficits and the contribution could be material. In the extreme, if no other participating employer were able to contribute, the Group could become liable to fund the entirety of one or all of the defined benefit pension schemes in an amount which would materially exceed the Group’s available financial resources. Notice has been served requiring the relevant employers to exit the Lloyd’s pension scheme effective on and from 1 July 2007. This exit will reduce this risk further but will itself trigger a ‘‘debt’’ of around £10 million to be paid by certain Group companies to the Lloyd’s pension scheme. The Group has indemnity protection in its contractual arrangements with Lloyd’s to cover this debt.

The Group could be subject to risks posed by the Pensions Act 2004. Under the ‘‘moral hazard provisions’’ of the Pensions Act 2004 the Pensions Regulator has the power to impose ‘‘contribution notices’’ and ‘‘financial support directions.’’ These notices and directions can extend liability to support defined benefit pension schemes to entities and people who are not the employers in the scheme. Under the moral hazard provisions the Group could be called upon to provide support to the BAE Systems’ schemes or the Lloyd’s pension scheme and could be called upon to support predecessor schemes (i.e. schemes that companies have been in previously but have now left).

The BPO industry is a relatively new industry and its growth may not be sustained. The Group commenced operations in 1999 and the scope of its operations has increased rapidly over the past few years. The BPO industry as a whole has also grown quickly during that time. Due to the industry’s relatively short history, it is difficult to determine whether demand for BPO services will continue to grow in line with recent trends if at all. A slowdown in BPO industry growth would likely have an adverse effect on the Group’s ability to sustain its own growth rate.

The Group may be unable to effectively manage its rapid growth. The Group’s rapid growth could place significant demands on its management and its internal controls. Growth requires the Group to continue to invest in personnel skilled in implementation. If the Group fails to attract, train and retain such resources, it may not be able to implement new contracts or integrate acquisitions. As a result of any of these constraints, the Group’s business, results of operations, financial condition and cash flows could be materially and adversely affected.

15 If the Group causes disruptions to its customers’ businesses or provides inadequate service, customers may have claims for damages against the Group. The Group’s insurance coverage may be inadequate to cover these or other claims. All of the Group’s major contracts contain service performance requirements, including requirements relating to the quality of the services. Failure to meet service requirements of a customer consistently or errors made by Group personnel in the course of delivering services to customers could disrupt the customer’s business and result in a reduction in revenue or a claim for damages suffered by the customer against the Group. As a result of the volume and nature of the information processed within certain Enterprise Partnerships (in particular in relation to securities and insurance processing), a minor error could have significant unforeseen financial implications. In addition, a failure or inability to meet a contractual requirement could damage the Group’s reputation and affect its ability to attract new business. Under the Group’s contracts, liability is generally capped at a portion of the service charges paid or payable to the Group under the relevant contract. However, contractual provisions set forth in the Group’s contracts may not, depending on the circumstances, protect the Group from all liability for damages. In addition, certain liabilities (such as for breach of confidentiality obligations, third party intellectual property rights and improper use of data), for which the Group may be required to indemnify its customers, are generally unlimited under those agreements. Although the Group has professional indemnity and crime insurance coverage, including coverage for errors or omissions and breaches of confidentiality and network security, that coverage may not be sufficient, may be disclaimed or may not continue to be available on reasonable terms or to be available in sufficient amounts to cover one or more large claims against the Group. Such circumstances could have a material adverse effect on its business, results of operations, financial condition and cash flows of the Group.

The Group is liable to its customers for damages caused by unauthorised disclosure of sensitive and confidential information, whether through a breach of its computer systems, through its employees or otherwise. The Group is required to manage, utilise and store sensitive or confidential customer data in connection with several of its major contracts. Under the terms of customer contracts, the Group is required to keep such information strictly confidential and liability is often not limited. If any person penetrates the Group’s network security or otherwise mismanages or misappropriates sensitive or confidential customer data, the Group could be subject to significant liability and lawsuits from its customers or from their customers for breaching contractual confidentiality provisions or privacy laws and could suffer damages to its reputation. The Group maintains insurance coverage for mismanagement or misappropriation of such information. There are risks that coverage may not be sufficient, may be disclaimed or may not continue to be available on reasonable terms or in sufficient amounts to cover one or more large claims against the Group. Such circumstances could have a material adverse effect on its business, results of operations, financial condition and cash flows of the Group.

The Group’s business may be adversely affected by disruptions to its IT systems. Many of the Group’s operations depend on its IT systems and the IT systems of third parties. Disruption of these systems could result from, amongst other things, technical and electricity breakdowns, computer malfunctions and viruses. Any failure of the Group’s equipment or systems, or any major disruption to basic infrastructure such as power and telecommunications in the locations in which the Group operates, could impede its ability to provide services to customers, have a negative impact on its reputation and harm its business.

The Group may fail to develop systems, technology and products that satisfy customers’ needs. The future success of the Group depends on its ability to enhance systems and products that continue to meet the requirements of its customers and produce planned savings in respect of their back-office functions which they have transferred to the Group. The Group’s competitors or customers may develop and introduce superior solutions or may do so more quickly than the Group. Failure to successfully enhance systems, technology and products or to keep pace with innovations in IT (for example, in the London Insurance Market to move from paper based processing to electronic processing) could have an adverse effect on the Group’s ability to attract and retain customers and so, on the Group’s business and profitability.

16 A number of third-party suppliers are key to the Group’s business operations; quality issues or supply disruptions may negatively affect the Group. The Group relies on the services of independent suppliers to meet its business operations needs. If one of the Group’s key suppliers decides to terminate its contract with the Group, the Group may experience difficulties in replacing the supplier on comparable terms. If this happens, the Group’s business and operations may be subject to interruptions. In addition, if the services, or products, provided by the Group’s suppliers experience problems or disruptions, it could affect the Group’s reputation both with its existing and future customers. If the Group were unable to retain its third-party suppliers or needs to increase the amount paid for its services or products, the Group’s business, prospects, results of operations or financial condition may be materially adversely affected.

The Group may be exposed to changes in law and regulation which could increase regulatory costs and prevent services from being provided. The ability of certain subsidiaries in the Group to continue to conduct banking activities in Germany and insurance intermediation activities in the UK requires the holding and maintenance of certain licences, permissions or authorisations and compliance with laws, rules and regulations promulgated from time to time in these jurisdictions. The failure of these subsidiaries to comply with these laws, rules and regulations could lead to disciplinary action, the imposition of fines or the revocation of the licence, permission or authorisation to conduct business in Germany or the UK, which could have a material adverse effect on the continued conduct of business in these jurisdictions. Over the past few years, the banking industry in Germany and the insurance intermediation industry in the UK have been subject to increased scrutiny by regulatory bodies. Further reviews and changes to the laws and regulation applicable to banking activities in Germany and insurance intermediation activities in the UK may occur in the future. The Group cannot predict the timing, form or full effect that any proposed or future law, regulation or initiative may have on the financial condition or results of operations of the Group. Changes to applicable law (including taxation) or regulation (or in their interpretation or enforcement) may occur at any time and may adversely affect the Group’s business. Such changes may also prevent the Group from providing a service or result in increased costs to the Group (if the Group is unable to pass the costs of such changes on to its customers), for example, due to it being required to set up additional compliance controls or due to the direct cost of such compliance. The Group’s customers’ business operations are also subject to applicable law and regulation. The Group’s customers may contractually require that the Group performs its services in a manner that would enable them to comply with such law and regulation. A change in applicable law or regulation may result in a customer requesting a change to the services provided which could potentially affect the cost basis and/or profits of the Group. The failure of the Group to perform its services in compliance with applicable rules and regulations could result in breaches of contract with the Group’s customers and, in some limited circumstances, the imposition of fines and criminal penalties on the Group.

The Group may be adversely affected by negative reactions to offshore outsourcing. Portions of the Group’s operations take the form of offshore outsourcing (that is, the transfer of tasks to geographic locations where such tasks can be performed more inexpensively, primarily in India). Current or prospective customers may be discouraged from transferring services from onshore to offshore providers to avoid negative perceptions (such as those associated with the loss of jobs from the domestic market) that may be associated with using offshore providers. Any slowdown or reversal of current industry trends toward offshore outsourcing could adversely affect the Group’s ability to utilise its Indian facilities to generate certain of the savings required by the Group to deliver profitable growth.

The Group may not be able to find and successfully integrate suitable acquisition opportunities. A part of the Group’s growth strategy is to identify and complete selective acquisitions to add expertise and scale to the Group’s operations. The success of this strategy will depend on the Group’s ability to find, evaluate and consummate suitable acquisitions on acceptable terms. Making further acquisitions will also depend on the Group’s ability to finance such acquisitions and its ability to obtain any necessary governmental approvals.

17 The international nature of the Group’s business exposes it to other risks. The Group has operations in France, Malaysia, the United States, India, the UK, Germany and Australia and services customers across Europe, and in North America and Asia. As a result, the Group is exposed to risks typically associated with conducting business internationally, many of which are beyond its control and could have a material adverse affect on the Group’s business, results of operations, financial condition and cash flows. These risks include: legal uncertainty owing to the overlap of different legal regimes, and problems in asserting contractual or other rights across international borders; potentially adverse tax consequences, such as scrutiny of transfer pricing arrangements by authorities in the countries in which the Group operates; potential tariffs and other trade barriers; foreign regulatory authorities and/or the audit committees of customers may inspect outsourced business areas, and thus may require access to the Group’s premises and/or systems; longer payment cycles in some countries; the burden and expense of complying with the laws and regulations of various jurisdictions; terrorist attacks and other acts of violence or war; an outbreak of an infectious disease or any other serious public health concern; and natural disasters.

The Group may be unable to protect its proprietary rights. The Group relies on intellectual property laws (including those related to patents, trade marks and intellectual property licenced to, or by, the Group) to protect its rights to certain aspects of its systems, products and processes including product designs, proprietary technologies, research and concepts. However, the actions the Group takes to protect its proprietary rights may be inadequate to prevent imitation or unauthorised use of its systems and products. The laws of various countries offer different levels of protection for the Group’s proprietary rights and there can be no assurance that the registration of the Group’s intellectual property will provide it with a competitive advantage. In addition, the Group may be subject to litigation by third parties claiming the Group has infringed their intellectual property rights. Any of these possibilities could have a material adverse effect on the Group’s business, results of operations and financial condition.

A significant change in the pound sterling/euro or the pound sterling/Indian rupee exchange rates may have an adverse effect on the Group’s results of operations. The Group’s financial statements are denominated in pounds sterling. However, based on the Group’s results for 2006, 24.8% of the Group’s revenues are earned in euros (primarily representing the results of its German operations). Accordingly, the Group’s financial results can be affected by fluctuations in currency exchange rates between the euro and the pound sterling. A depreciation of the euro against the pound sterling will adversely affect the amount of revenues and expenses the Group records in pound sterling in its financial statements. A depreciation of the euro against the pound sterling may therefore have an adverse effect on the Group’s results of operations. A portion of the Group’s operating expenses are incurred in Indian rupees, so a significant strengthening of the rupee against the pound sterling could limit the Group’s ability to achieve cost savings from using Indian operations. Such a strengthening could have an adverse affect on the Group’s results of operations.

Risks relating to the Global Offer By virtue of its significant shareholding, General Atlantic may be able to influence shareholder decisions. Upon completion of the Offer, General Atlantic will beneficially own, in the aggregate, approximately 34.3% of the issued Shares, and 28.2% of the issued Shares if the Over-allotment Option is exercised in full. Whilst the Company has entered into a Relationship Deed with General Atlantic to ensure that the Group is capable of carrying on its business independently of General Atlantic, by virtue of the level of its shareholding General Atlantic may be able to influence certain matters requiring approval of the Company’s shareholders, such as the election of directors and certain business decisions. This concentration of control could be disadvantageous to other shareholders with interests different from

18 those of General Atlantic. In addition, this concentration of share capital ownership may adversely affect the prevailing market price for the Group’s shares because investors could perceive disadvantages in owning shares in companies with a concentration of ownership by a single shareholder.

Substantial future sales of Shares could impact the market price of the Shares Upon completion of the Global Offer, the Directors, the Selling Shareholders and the Senior Managers will in aggregate hold 113,065,250 Shares (or 100,437,219 Shares if the Over-allotment Option is exercised in full). These Shares will be subject to lock-up arrangements, described in further detail in paragraph 7 of Part 3: The Global Offer. Sales of substantial amounts of Shares following the expiry of the lock-up periods could adversely affect the prevailing market price of the Shares. These sales may also make it difficult for the Group to issue equity securities in the future at a time and at a price that it deems appropriate.

There has been no public trading market for the Shares and an active trading market may not develop. Prior to the Global Offer there has been no public trading market for the Shares. The Group does not know the extent to which investor interest in the Group will lead to the development of a trading market following Admission or how liquid that market might be, or, if a trading market does develop, whether it will be sustained. If an active and liquid trading market does not develop or is sustained, investors may have difficulty selling their Shares.

The Shares may be subject to market price volatility and the market price for the Shares may decline disproportionately in response to adverse developments that are unrelated to the Group’s operating performance. The Offer Price may not be indicative of the market price for the Shares following Admission. Following Admission, the trading price of the Shares may be subject to wide fluctuations in response to many factors, including those referred to in this section, as well as period-to-period variations in operating results or changes in revenue or profit estimates by the Group, industry participants or financial analysts. The trading price of the Shares could also be adversely affected by developments unrelated to the Group’s operating performance such as operating and share price performance of other companies that investors may consider comparable to the Group; speculation about the Group in the press or the investment community; strategic actions by competitors, such as acquisitions and restructurings; changes in market conditions and regulatory changes.

The Company may not be able to pay dividends. As a matter of English law, the Company can pay dividends only to the extent that it has available distributable reserves. The Company will only become the parent of the Group on Admission and has not traded in the period from its incorporation to Admission. Accordingly, it has no distributable reserves and its ability to pay dividends to shareholders in the future is therefore a function of the existing distributable reserves within the Group (to the extent they are available for distribution), its future profitability and the outcome of a restructuring of the Group to be undertaken following Admission. Under this restructuring, the Company will transfer Xchanging B.V. to a subsidiary in exchange for shares and the subsidiary will then seek the approval of the High Court in London to reduce its share capital and thereby create distributable reserves from which dividends may be paid to the Company which in turn will utilise the distributable reserves so created to pay dividends to Shareholders. Whilst the Company expects the High Court to approve the reduction, this cannot be assured. The Company’s distributable reserves could be adversely affected by reductions in profitability as well as by impairment of assets.

Exchange rate fluctuations may expose an investor whose principal currency is not pounds sterling to foreign currency rate risk. The Shares are, and any dividends to be paid in respect of them will be, denominated in pounds sterling. An investment in Shares by an investor whose principal currency is not pounds sterling exposes the investor to foreign currency rate risk. Any depreciation of sterling in relation to such foreign currency will reduce the value of the investment in the Shares or any dividends in foreign currency terms, and any appreciation of sterling would increase the value in foreign currency terms.

US and other non-UK holders of Shares may not be able to exercise pre-emption rights. In the case of certain increases in the Group’s issued share capital, existing holders of Shares are generally entitled to pre-emption rights to subscribe for such Shares, unless Shareholders waive such rights by a

19 resolution at a shareholders’ meeting, or in certain other circumstances as stated in the Articles. US holders of Shares are customarily excluded from exercising any such pre-emption rights they may have, unless a registration statement under the Securities Act is effective with respect to those rights, or an exemption from the registration requirements thereunder is available. The Group has no current plan to file any such registration statement, and the Group cannot assure prospective investors that any exemption from the registration requirements would be available to enable US or other overseas holders to exercise such pre-emption rights or, if available, that the Group will utilise any such exemption.

There is doubt as to the enforceability in England and Wales of claims based on federal securities laws of the United States. The Company is a public limited company incorporated under the laws of England and Wales. The majority of the Directors and officers of the Company and certain of the Selling Shareholders reside outside the United States. In addition, a substantial proportion of the assets of the Directors and officers, certain of the Selling Shareholders and the Group are or may be located outside the United States. It may not be possible, therefore, for investors to effect service of process within the United States upon the Company or its Directors or officers or such Selling Shareholders, or to enforce in US courts judgments against them obtained in those courts based upon the civil liability provisions of the federal securities laws of the United States. Furthermore, there is substantial doubt as to the enforceability in England and Wales, whether by original actions or by seeking to enforce a judgment of a US court, of claims based on the federal securities laws of the United States.

20 OTHER IMPORTANT INFORMATION Over-allotment and Stabilisation In connection with the Global Offer, UBS, as stabilising manager on behalf of the Underwriters (the ‘‘Stabilising Manager’’), may, for stabilisation purposes, over-allot Shares up to a maximum of 15% of the total number of Shares comprised in the Global Offer. For the purposes of allowing it to cover short positions resulting from any such over-allotments and/or from the sales of Shares effected by it during the stabilisation period, the Stabilising Manager has entered into the Over-allotment Option with General Atlantic which is exercisable in whole or in part, upon notice by the Stabilising Manager, for the period commencing on the date of publication of the Offer Price and ending 30 days thereafter. Pursuant to the Over-allotment Option, the Stabilising Manager may require General Atlantic to transfer up to 12,628,031 additional Shares at the Offer Price, inter alia, to cover over-allotments or further allotments, if any, in connection with the Global Offer and/or to cover short positions resulting from stabilisation transactions. In connection with the Global Offer, the Stabilising Manager or any of its agents may (but will be under no obligation to) to the extent permitted by applicable law over-allot or effect transactions intended to enable it to satisfy any over-allotment or which stabilise, maintain or otherwise affect the market price of the Shares at a level higher than that which might otherwise prevail. Such transactions may be effected on the London Stock Exchange, on over-the-counter markets or otherwise and may be undertaken at any time during the period commencing on the date of publication of the Offer Price and ending no later than 30 days thereafter. However, there may be no obligation on the Stabilising Manager or any of its agents to effect stabilising transactions and no assurance is given that stabilising transactions will be undertaken. Such transactions, if commenced, may be discontinued at any time without prior notice. In no event will measures be taken to stabilise the market price of the Shares above the Offer Price. Save as required by any legal or regulatory obligation, neither the Stabilising Manager nor any of its agents intends to disclose the extent of any over-allotment and/or stabilisation transactions under the Global Offer.

NOTICE TO NEW HAMPSHIRE RESIDENTS ONLY NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENCE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED STATUTES (‘‘RSA 421-B’’) WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE OF THE STATE OF NEW HAMPSHIRE, THAT ANY DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE OF THE STATE OF NEW HAMPSHIRE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE OR CAUSE TO BE MADE TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.

Available Information for investors in the United States The Company has agreed that, so long as any of the Shares are ‘‘restricted securities’’ within the meaning of Rule 144A(a)(3) under the Securities Act, the Company will, during any period in which the Company is neither subject to section 13 or 15(d) of the US Securities Exchange Act of 1934, as amended, nor exempt from reporting pursuant to Rule 12g3-2(b) thereunder, furnish, upon request, to any holder or beneficial owner of Shares offered hereby, or any prospective purchaser of such restricted stock designated by such holder or beneficial owner, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.

Forward-looking Statements This document includes ‘‘forward-looking statements’’ which include all statements other than statements of historical facts included in this document, including, without limitation, those regarding the Group’s or, as appropriate, the Directors’ current views with respect to financial performance, business strategy, plans and objectives of management for future operations (including development plans relating to the Group’s products and services). These statements relate to both the Group and the sectors and industries in which

21 the Group operates. Statements which include the words ‘‘expects’’, ‘‘intends’’, plans’’, ‘‘believes’’, ‘‘projects’’, ‘‘anticipates’’, ‘‘will’’, ‘‘targets’’, ‘‘aims’’, ‘‘may’’, ‘‘would’’, ‘‘could’’, ‘‘continue’’ and similar statements of a future or forward-looking nature identify forward-looking statements for purposes of the US federal securities laws or otherwise. These statements are contained in sections entitled Summary Information, Risk Factors, Part 1: Information on the Group and Part 4: Operating and Financial Review and other parts and sections of this document. All forward-looking statements address matters that involve risks and uncertainties. Accordingly, there are or will be important factors that could cause the Group’s actual results to differ materially from those indicated in these statements. These factors include, but are not limited to, those described in the part of this document entitled ‘‘Risk Factors’’, which should be read in conjunction with the other cautionary statements that are included in this document. Any forward-looking statements in this document reflect the Group’s current views with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to the Group’s operations, results of operations, growth strategy and liquidity. These forward-looking statements speak only as of the date of this document. Subject to any obligations under the Prospectus Rules, the Disclosure Rules and the Listing Rules and save as required by law, the Company undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. All subsequent written and oral forward- looking statements attributable to the Group or individuals acting on behalf of the Group are expressly qualified in their entirety by this paragraph. Prospective investors should specifically consider the factors identified in this document which could cause actual results to differ before making an investment decision.

The Acquisition This document has been prepared on the basis that the Acquisition has occurred, although this will only occur upon Admission becoming effective.

Enforceability of Civil Liabilities The Company is a public limited company incorporated under the laws of England and Wales. The majority of the Directors and officers of the Company and certain of the Selling Shareholders reside outside of the United States. In addition, a substantial portion of the assets of the Directors and officers, certain of the Selling Shareholders and the Group are or may be located outside the United States. It may not be possible, therefore, for investors to effect service of process within the United States upon the Company or its Directors or officers or such Selling Shareholders, or to enforce in US courts judgments against them obtained in those courts based upon the civil liability provisions of the federal securities laws of the United States. Furthermore, there is substantial doubt as to the enforceability in England and Wales, whether by original actions or by seeking to enforce a judgment of a US court, of claims based on the federal securities laws of the United States.

References to Defined Terms Certain terms used in this document, including certain capitalised terms and certain technical and other terms, are defined, and certain selected industry and technical terms used in this document are defined and explained, in Part 9: Definitions and Glossary.

22 PRESENTATION OF FINANCIAL AND OTHER INFORMATION Financial Data Unless otherwise indicated, the financial information in this document has been prepared in accordance with IFRS as adopted by the European Union (‘‘IFRS’’). IFRS differs in certain significant respects from US GAAP. The Company has not quantified the impact of those differences on its adopted accounting policies. In making an investment decision, prospective investors must rely on their own examination of the Group, the terms of the Global Offer and the financial information in this document. Prospective investors should consult their own professional advisers for an understanding of the differences between IFRS and US GAAP. Certain figures contained in this document, including financial information, have been subject to rounding adjustments. Accordingly, in certain instances, the sum of the numbers in a column or a row in tables contained in this document may not conform exactly to the total figure given for that column or row. IFRS differs in certain respects from generally accepted accounting principles in the United States (‘‘US GAAP’’). The Group has not prepared and does not currently intend to prepare its financial statements in, or reconcile them to, US GAAP. In making an investment decision, prospective investors must rely on their own examination of the Group, the terms of the Global Offer and the financial information in this document. Prospective investors should consult their own professional advisers for an understanding of the differences between US GAAP and IFRS.

Market, Economic and Industry Data Market, economic and industry data used throughout this document is sourced from various industry and other independent sources. Unless otherwise indicated, market data, statistics and information in this document in respect of the Business Processing Outsourcing market have been sourced from reports and data tables published by IDC. Where market, economic and industry data is from industry and other independent sources, the publications in which they are contained generally state that the information they contain has been obtained from sources believed to be reliable, but that the accuracy and completeness of such information is not guaranteed.

Currency Presentation Unless otherwise indicated, all references in this document to ‘‘pounds sterling’’, ‘‘£’’, ‘‘pence’’ or ‘‘p’’ are to the lawful currency of the UK, all references to ‘‘$’’, ‘‘US$’’ or ‘‘US dollars’’ are to the lawful currency of the US and all references to ‘‘A’’ or ‘‘Euros’’ are to the currency introduced at the start of the third stage of European economic and monetary union pursuant to the Treaty establishing the European Community, as amended.

Key Performance Indicators (‘‘KPIs’’) The Group has included in this document presentations of adjusted operating profit, XEBIT and XPAT which it believes are appropriate to reflect its ongoing operations. None of adjusted operating profit, XEBIT or XPAT should be considered as an alternative to operating profit, profit for the year or any other performance measures derived in accordance with IFRS. Adjusted operating profit, XEBIT and XPAT may not be indicative of the Group’s historical operating results, nor are they meant to be predictive of future results. The adjusted operating profit, XEBIT and XPAT figures for the years ended 31 December 2004, 2005 and 2006 have been derived on the basis of methodologies other than in accordance with IFRS. Where information has been derived, it has been calculated by adding together and/or subtracting figures which are extracted without material adjustment either from the financial statements that appear in Section A of Part 5: Accountants’ Reports and Financial Information or in the notes thereto. The Group utilises these supplemental measures that it believes are useful and important in analysing performance. Adjusted operating profit, XEBIT and XPAT may not be comparable to similarly titled measures disclosed by other companies. Investors should not consider these non-GAAP measures in isolation or as a substitute for operating profit/loss or profit after tax as determined by IFRS. Investors should not use these non-GAAP measures as a substitute for the analysis provided in the Group’s income statements or cash flow statements. Accordingly, undue reliance should not be placed on the adjusted operating profit, XEBIT and XPAT data contained in this document.

23 Initial Contract Values and Indirect Spend The Group estimates initial contract values based on the revenue the Group expects to generate (assuming no services are provided in addition to those originally contemplated by the contract) over the maximum life of the contract. The Group estimates the indirect spend values of its procurement contracts based on the customer’s non-core expenditure (or ‘‘indirect spend’’) which the Group expects to manage for the customer either annually or over the maximum life of the contract as described (assuming no additional services are provided under the contract). Both of these values are as estimated at the beginning of the contract, have not been updated and should not be taken as an indication of historic or future contract performance. Additionally, where relevant, the Group has used an assumed exchange rate of A1.45 to £1 to estimate contract values.

24 GLOBAL OFFER STATISTICS The Global Offer statistics in this document are subject to change at the determination of the Company.

Offer Price per Share ...... 240p Number of Shares being offered...... 84,186,874 New Shares...... 31,250,000 Existing Shares...... 52,936,874 Number of Shares subject to the Over-allotment Option(1)...... 12,628,031 Percentage of enlarged issued share capital being offered ...... 41% Number of Shares in issue following the Global Offer ...... 205,578,408 Market capitalisation...... £493 million Proceeds receivable by the Company after expenses(2)...... £65 million Proceeds receivable by the Selling Shareholders after expenses(3)...... £122 million

EXPECTED TIMETABLE FOR THE GLOBAL OFFER Each of the times and dates is subject to change without further notice. References to a time of day are to London time (unless stated otherwise).

Announcement of Offer Price and notification of allocations...... 25 April 2007 Prospectus containing, inter alia, the Offer Price published...... 25 April 2007 Conditional dealings in Shares commence(4) ...... 8.00 a.m. on 25 April 2007 Admission and expected commencement of unconditional dealings in Shares ...... 8.00 a.m. on 30 April 2007 Shares credited to CREST accounts(5)...... 8.00 a.m. on 30 April 2007 Where applicable, definitive share certificates available for despatch from or as soon as practicable after ...... 14 May 2007

(1) The number of Shares subject to the Over-allotment Option is, in aggregate, equal to 15% of the total number of Shares to be issued or sold in the Global Offer. (2) The proceeds receivable by the Company are stated after deduction of estimated underwriting commissions and other fees and expenses of the Global Offer payable by the Company and are expected to be approximately £10 million (assuming that the full discretionary fee is paid to the Underwriters). The Company will not receive any of the net proceeds from the sale of the Existing Shares in the Global Offer. (3) The proceeds receivable by the Selling Shareholders are stated after deduction of estimated underwriting commissions and stamp duty, assuming that there is no exercise of the Over-allotment Option and that the full discretionary fee is paid to the Underwriters. (4) It should be noted that, if Admission does not occur, all conditional dealings will be of no effect and any such dealings will be at the sole risk of the parties concerned. (5) Or as soon as practicable thereafter. No temporary documents of title will be issued.

25 DIRECTORS, COMPANY SECRETARY, REGISTERED OFFICE AND ADVISERS Board of Directors John Robins (Non-Executive Chairman) David Andrews (Chief Executive Officer) Richard Houghton (Chief Financial Officer) Adele Browne (Executive Director, Sales and Commercial) David Hodgson (Non-Executive Director) Tom Tinsley (Non-Executive Director) Stephen Brenninkmeijer (Non-Executive Director) Dennis Millard (Non-Executive Director) John Bramley (Non-Executive Director) Nigel Rich (Non-Executive Deputy Chairman) Johannes Maret (Non-Executive Director) Friedrich Carl Janssen (Non-Executive Director) all of 13 Hanover Square London, W1S 1HN Company Secretary Gary Whitaker Registered Office and 34 Leadenhall Street telephone number London, EC3A 1AX +44 (0) 20 7780 6999 Sponsor Citigroup Global Markets Limited Citigroup Centre Canada Square London, E14 5LB Joint Global Citigroup Global Markets U.K. Equity Limited Co-ordinators and Citigroup Centre Joint Bookrunners Canada Square London, E14 5LB UBS Limited 1 Finsbury Avenue London, EC2M 2PP Co-Lead Managers Bridgewell Limited Old Change House 128 Queen Victoria Street London, EC4V 4BJ Jefferies International Limited Floor 4, Bracken House 1 Friday Street London, EC4M 9JA Legal Advisers to the Clifford Chance LLP Company as to English and 10 Upper Bank Street US law London, E14 5JJ Legal Advisers to the Clifford Chance LLP, Amsterdam Company as to Dutch law Droogbak 1A 1013 GE Amsterdam Legal Advisers to the Linklaters Joint Global Co-ordinators, One Silk Street Joint Bookrunners and the London, EC2Y 8HQ Underwriters as to English and US law Auditors to the Group and PricewaterhouseCoopers LLP Reporting Accountants 1 Embankment Place London, WC2N 6RH Registrars Lloyds TSB Registrars The Causeway Worthing, BN99 6QQ

26 PART 1: INFORMATION ON THE GROUP The following information should be read in conjunction with the more detailed information appearing elsewhere in this document, including the financial and other information in Part 4: Operating and Financial Review and Part 5: Accountants’ Reports and Financial Information on the Group. The financial information included in this Part 1: Information on the Group has been extracted without material adjustment from Part 5: Accountants’ Reports and Financial Information on the Group and Part 6: Unaudited Pro Forma Financial Information, or has been extracted without material adjustment from the Group’s accounting records.

1. COMPANY OVERVIEW The Group is one of the leading international, pure play business process outsourcing (‘‘BPO’’) providers. It has more than 3,800 employees operating in seven countries and services blue-chip customers in 34 countries, with a focus on the United Kingdom and Continental Europe. The Group provides industry specific processing and other services to the banking and insurance industries and also provides procurement, finance and accounting and human resources services to customers across industries. The Group’s customers include Aon, BAE Systems, Boots the Chemists, Citibank, Deutsche Bank, the IUA, Lloyd’s, National Australia Group, Sal. Oppenheim, United Biscuits and University Hospital Birmingham. The Group performs complex, large-scale processing on behalf of its customers, providing them with better service at a lower cost than when these functions were performed internally. Operating customers’ non-core functions is the Group’s core business. Examples of the Group’s services in 2006 included: settling an estimated 15% of securities transactions in the German market, settling £11.4 billion of insurance claims in the Lloyds insurance market, providing human resource and payroll services and support to 1.5 million staff and their dependants, procuring £390 million of indirect spend and paying over £800 million of invoices. The Group offers a full suite of BPO services including large-scale partnering, outsourcing, software products and solutions, Straight Through Processing (‘‘STP’’) and business support. At the heart of the Group’ s business strategy is a unique partnering approach. The Group takes over a customer’s back office and creates a jointly owned business with its customer called an ‘‘Enterprise Partnership’’ or ‘‘EP’’. Enterprise Partnerships provide the Group with scalable platforms from which it can also offer its services to other customers. A key component of the Group’s partnering and procurement outsourcing arrangements is its ‘‘gain share’’ approach. This ‘gain-sharing’ approach is a step beyond that of a traditional outsourcing arrangement where a customer outsources services in return for payment of an agreed fee. The nature of the gain-sharing relationship provides transparency for all parties, shortens decision- making time and engenders an environment of trust. The Group uses a distinctive execution approach to deliver its services in a standardised and repeatable way. The Group delivers its services through a balance of on-shore and offshore operations, seeking to provide the lowest cost solution consistent with its customers’ requirements. The Group recorded revenues of £393.5 million for the year ended 31 December 2006, an increase from £350.0 million in 2005 and £254.1 million in 2004 (a 2004-2006 CAGR of 24%).

2. HISTORY OF THE GROUP The Group was founded in 1999 by David Andrews with funding provided by General Atlantic. Prior to the creation of the Group, David was a board member of Andersen Worldwide and the managing partner of Andersen Consulting Western Europe. David built up the Accenture (formerly known as Andersen Consulting) outsourcing business. Building a team drawn from a wide range of operational, commercial and implementation backgrounds and backed by General Atlantic, he has developed, in Xchanging, a unique capability for meeting the burgeoning demand for transforming back-office operations.

27 The Group’s first major outsourcing arrangement was an EP with BAE Systems with an initial contract value of £249 million, created in 2001 to provide a range of human resource services. In the same year the Group established two insurance EPs, one with Lloyd’s and the other with Lloyd’s and the IUA, and entered into a new EP with BAE Systems for procurement services (for the management of £80 million of annual indirect spend, which has grown to an annual indirect spend value of £150 million). The combined initial contract value and indirect spend for the BAE Systems EPs was £1 billion over 10 years. In 2003, the Group expanded its operations to France and Germany by opening offices in each location. As a result of this expansion, the Group was able to secure an EP with Deutsche Bank for securities processing in 2004, marking the Group’s entry into providing outsourcing services for the banking industry. In 2004, the Group’s insurance activities were further expanded through the acquisition of Rebus Insurance Services Holdings Limited (‘‘RebusIS’’) which allowed the Group to broaden the range of services provided to the Insurance industry to include Products and Business Support. As part of the RebusIS acquisition, the Group also acquired a small IT services operation in India. At the time of the acquisition, the Indian office had approximately 59 employees. Since 2004, the Group has expanded its Indian operations to approximately 11% of total Group employees as at 31 December 2006. The Group’s procurement services business was enhanced by procurement Outsourcing arrangements with United Biscuits in 2004 (originally for the management of £590 million of indirect spend over 5 years before the disposal by United Biscuits of certain businesses within the contract) and Boots the Chemists in 2005 (covering the management of £58 million of annual indirect spend and the processing of £800 million of invoices annually). The Group’s securities processing platform in Germany was extended to Citibank’s German operations in 2005. In 2006, the Group acquired two small businesses to supplement its existing platforms Landmark Business Consulting Ltd (‘‘Landmark’’) (offering specialist business transformation skills to the UK insurance sector) and Ferguson Snell & Associates Ltd (‘‘Ferguson Snell’’) (offering corporate immigration services). Later in 2006, the Group entered into an EP for insurance broking with Aon, having an initial contract value of £232 million, to complete its coverage of the entire commercial insurance value chain, from placing to claims settled. In addition, the Group won a human resources and payroll outsourcing agreement with University Hospital Birmingham in a competitive tender process. This was the Group’s first public sector outsourcing arrangement. The Group also expanded its operations to Australia to service a new procurement Outsourcing arrangement with BAE Systems Australia (for the management of total indirect spend value of AUS$283 million) and entered into two additional new Outsourcing arrangements for procurement with Liberata (a BPO business headquartered in the UK in which General Atlantic owns a majority of shares) and National Australia Group, respectively. In early 2007, the Group purchased BAE Systems’ 50% interests in each of the procurement and human resources EPs, giving the Group full ownership while extending the term of the related service agreements to 2012. The purchase of BAE Systems’ partnership interests represents the achievement of the Group’s ultimate goal for its EPs: as partnerships mature and the risks in the new venture decrease, the Group aims to take full ownership of the EP whilst continuing to service their previous partner through traditional Outsourcing arrangements.

3. KEY STRENGTHS The Group believes the following are its key strengths: Strong Competitive Position. The Group focuses on providing complex back office processes and services. The Group believes its unique partnering approach and full suite of BPO offerings provide competitive advantage and enable the Group to manage complex processes across a range of industries. The Group offers a unique Partnering approach which seeks to align the interests of the Group and its customers. This approach involves the gain-sharing of benefits with strong associated governance mechanisms. This allows the Group to take over the operation of

28 complex large-scale back office functions which customers might not otherwise be prepared to outsource. It also allows the Group to enter new markets or geographic areas in a controlled, low risk manner by developing a service capability which uses the customer’s own assets and employees, thereby reducing the investment that would otherwise be required to develop this capability. The Group provides a full suite of BPO offerings. It provides large-scale Partnering and Outsourcing arrangements which are specifically designed for major, complex BPO arrangements. The Group also provides Products and Business Support offerings which provide services and solutions for smaller-scale customer needs. This focus on complex processing, its unique Partnership approach and its full range of BPO offerings has allowed the Group to establish successful large-scale arrangements with blue chip customers (including Deutsche Bank, Lloyd’s, Aon, Boots the Chemists, Citibank and BAE Systems) in three core sectors (Financial Markets, Insurance and Business Lines). The Group believes that it is one of a limited number of international BPO providers that has the proven capability to carry out major BPO arrangements across such a broad a range of business sectors for such an international customer base. The Group also differentiates itself from certain of its BPO competitors by offering a combination of onsite, onshore but off-site (or ‘‘near-shore’’) and offshore services to meet customers’ needs, objectives and constraints. This mix of delivery capabilities allows service costs to be reduced and is necessary to provide the complex services and processes the Group undertakes on behalf of its customers. High Growth Rate Market. According to IDC, the combined value of the human resources, finance and accounting, customer care and procurement BPO markets in Western Europe, Asia Pacific and the US was some US$49 billion(1) in 2005. IDC is forecasting that the value of this market will grow by a compound annual rate of of 13.8% between 2005 to 2010. In Western Europe, where the Group derives the largest portion of its revenues, IDC forecasts a 14.7% CAGR (including industry-specific BPO revenue) during the same period. The Group’s revenue has grown from £39.9 million in 2001 to £393.5 million in 2006, a CAGR of 58%.(2) From 2004 to 2006 the Group outperformed the growth rate of the BPO market with the Group revenue increasing from £254.1 million to £393.5 million, a CAGR of 24%. The Group believes that it is well placed to grow at least in line with the overall BPO market through its partnering proposition and its broad range of offerings. The Group believes its growth potential is reinforced by barriers to entry in its target market (large-scale, complex BPO arrangements) and the Group expects these barriers will grow over time. The Group believes that its successful implementation experience and consequent development of platforms and domain expertise in several of the most complex and attractive business sectors, as well as its applied IT expertise, are becoming increasingly hard to replicate as the BPO sector develops. Also, it would be difficult for a competitor to replicate the Group’s re-usable assets, systems and scalable infrastructure. High Revenue Visibility. The Group enjoys a high degree of visibility of expected revenue as a result of the long term nature of its contracts and the relationships it builds with its major customers. The Enterprise Partnerships’ service agreements with the partners tend to have terms of 10 years or more and most non-partnership Outsourcing contracts generally have terms of 5 to 7 years. In the London Insurance Market, the Group has contracts with market participants that are subject to between three and 12 months’ notice. For the year ended 31 December 2006, over 90% of Group revenue was derived from customers with whom, as at 31 December 2006, the Group has at least one agreement that has over one year remaining prior to its maturity and 67% of Group’s 2006 revenue was derived from customers with whom, as at 31 December 2006, the Group has at least one agreement that has over five years remaining prior to maturity. The Group’s gain-sharing approach, with its emphasis on close cooperation with customers and focus on complex projects, is based on relationships with very senior levels of customer

(1) Source: IDC—Doc #2014178, Doc #BP01N, and Doc #AP224107N. (2) Revenue for the years ended 31 December 2001 was taken from the Group’s audited financial statements for that year prepared using UK GAAP in 2001.

29 management and the development within the Group of in-depth knowledge of key aspects of its customers’ businesses. These help the Group to tailor its solutions to meet customer needs. The extent of these relationships also enhances the Group’s ability to find and exploit opportunities to increase the scope and scale of existing contracts or services through STP and the sale of Products and Business Support. The Group seeks to further customer loyalty through its Products and Business Support offerings. The Products the Group offers are primarily software solutions designed to enhance the efficiency of a particular back office function and its Business Support offering involves the provision of advisory and fulfillment or other support services to a customer with respect to a specific back office function. The functions served by the Group’s Products and Business Support offerings are typically sufficiently narrow or straightforward that they would not warrant a Partnership or other gain-sharing structure. Through its ability to offer Products and Business Support (aimed at smaller scale customer needs), as well as its Enterprise Partnerships and other major gain-sharing arrangements (for complex, large-scale arrangements), the Group provides services matched to the scale of customers’ needs, thereby increasing its opportunities to undertake further business for a customer and enhance the strength and depth of its customer relationship. Established Profitability with the Opportunity for Further Margin Enhancement. The Group focuses on achieving profitability through a combination of rigorous contracting techniques, continual productivity improvements, scaling its existing service infrastructure and detailed performance measurement. The Group has demonstrated its focus on increasing profitability, achieving a CAGR of 56.7% in XEBIT from 2004-2006, with XEBIT margins increasing from 3.6% to 5.6% during the same period. XPAT has increased at a 67.3% CAGR from 2004-2006 while, XPAT margins increased from 2.4% to 4.4% during the same period. During the development phase of major arrangements, the Group works closely with the customer to carefully define the parameters of the services to be provided (referred to as the ‘‘service definition’’) and analyses the costs the customer incurs to provide the service (referred to as the ‘‘production definition’’). These provide the baseline for the services to be delivered and allow the Group to identify how productivity gains will be measured and achieved. The Group enhances productivity, and therefore profitability, through a wide range of actions, including process improvement, consolidation of operations both within and across sites and through arbitrage (lowering costs of resources by changing sites where work is performed or better alignment of employee skills to processes). The Group seeks to enhance profitability further by focusing on developing platforms and systems that are easily scalable and readily adaptable or re-usable in other similar applications. This flexibility is achieved through the Group’s drive towards standardisation and repeatability of processes and methodologies. This focus enables the Group to leverage the use of its existing service platforms to supply services to adjacent areas of existing customers’ businesses and to similar functions and provide outsourcing products and services to other potential customers. To monitor and improve profitability, the Group maintains very thorough and regular performance measurement procedures that are standardised across all its operations, with a view to driving efficiency and productivity improvements. The Group uses a combination of empirical and perception-related criteria to evaluate its service performance and identify areas in need of attention, investment or change. Proven Entrepreneurial Management. The Group benefits from a management team with extensive experience in BPO, in executing complex processing contracts and in delivering against a clear strategy. The majority of Executive Directors and senior management have been together for over six years and they have successfully implemented large scale BPO projects across a range of industries. The Group’s management seek to continually increase efficiency and productivity both with respect to customers’ operations as well as the Group’s internal practices and methods. Within its well-developed system for monitoring the performance, the Group’s management seeks to foster, and provide incentives for, a company-wide and pervasive entrepreneurial focus.

30 4. GROWTH STRATEGY The Group intends to increase earnings and create further value for shareholders through the strategies outlined below. Expanding Existing Business Platforms. The Group will continue to seek to increase revenue from existing platforms by offering processing services and products to new and existing customers utilising its knowledge of customers’ needs and operations and its in depth industry and domain expertise. ‘‘Straight Through Processing’’ is a delivery method by which the Group takes an existing service platform and applies it to another area of that existing customer’s business. This enables the Group to capture a larger portion of the value chain and to generate provision of further outsourcing savings to the customer. Similarly, an existing service platform can also be applied to a similar area of a new customer’s business. This leverages the use of the existing platform, enhancing its profitability to the Group. In addition, the Group will seek to increase revenues from existing customers and new customers by offering them products and services from other parts of its portfolio. Developing New Service Platforms via Partnerships. The Group has extensive experience and expertise in successfully developing and implementing large BPO arrangements across a variety of industries. In the course of doing so, the Group has developed various tools (including its rigorous contracting techniques, productivity enhancement techniques, performance management methodologies and an emphasis on repeatability and scalable processes) that it believes can be applied across many industries and geographic areas. The Group also recognises that its partners have been critical to the successful development of the Group’s major platforms by providing, amongst other things, physical and IP assets together with significant domain knowledge (in the staff transferred to the EP). The Group will therefore seek to enter into new Partnerships in order to develop new service platforms to undertake processing functions not currently undertaken by the Group, and will seek to do so across new industries and new geographic areas. Achieving a Low Cost Production Position. The Group will continue to seek to provide its services for the lowest cost possible that is consistent with its customers’ needs and constraints. The Group will continue to seek to optimise the efficiency of providing its services through the use of on-site Group-developed procedures and methodologies, through the off-site amalgamation of services and through provision of outsourcing services from low cost offshore locations (principally from the Group’s facilities in India). The Group seeks to provide a balanced on-site, off-site and offshore approach to maximise cost savings within the framework of its customers’ constraints. For example, it may only be possible to provide certain services on-site or off-site as regulatory restrictions or union pressures may cause customers not to wish to, or not to be able to, relocate some functions to low cost locations. In addition, by standardising functions, streamlining and batching procedures, eliminating duplicative functions and similar techniques, the Group continually seeks to free up capacity within given assets or systems, and then to utilise this capacity to perform similar operations either in other areas of a given customer’s business or in comparable operations in other customers’ businesses, thus improving profitability by generating more revenue with the same infrastructure. Making selective acquisitions. The Group will continue to consider selective acquisitions in areas in which the Group may require additional expertise, or where such acquisitions would enhance the scale of existing operations (either vertically, geographically or in terms of technological capability) in a manner consistent with the core practices of the Group. The Group has integrated the operations of RebusIS (acquired in 2004), adding substantially to the scope of its Business Support and Product offerings in the Insurance sector. In January 2006 the Group acquired Landmark, which allowed the Group to broaden its services in the Insurance sector. Similarly, in April 2006, the Group acquired Ferguson Snell, which enabled the Group to provide customers with corporate immigration related services. The Group believes that its values, methodologies and systems can be efficiently applied to other acquired operations. Buying out partners’ shares in EPs. Where appropriate, the Group will continue to seek to buy-out its partners’ interests in EPs as they reach maturity and thereafter provide services to the partner through an Outsourcing contract. As EPs reach their maturity, they are likely

31 to require less active input from partners, and a shareholding participation in the EP may be seen as unneccessary to such partners. Becoming the sole owner of major arrangements enables the Group to assert full strategic control over an EP’s operations. In early 2007, the Group bought out the interests of BAE Systems in its human resources and procurement EPs.

5. MARKET ENVIRONMENT 5.1 BPO Market BPO companies offer their customers operational efficiency improvements and improved service of their non-core, but often mission-critical, processing operations. BPO service providers typically enter into medium to long term outsourcing contracts which allow them to deliver cost reductions and superior services provision over time. Outsourcing penetration has been driven by customers’ increasing focus on core areas of competence, cost reduction initiatives and a desire to reduce levels of investment. BPO is typically separated into the five core processes of human resources; finance and accounting; customer care; procurement and industry specific processes. Human resources BPO includes services such as recruitment and benefits/pension administration; finance and accounting includes services such as accounts payable management and fixed asset accounting; procurement includes services such as direct/indirect spend management and sourcing strategies; customer care includes services such as call-centre management and customer acquisition; and industry specific includes processes that are unique to a specific industry or vertical, such as securities processing, insurance claims settlement and utilities billing. According to IDC, the combined value of the human resources, finance and accounting, customer care and procurement BPO markets in Western Europe, Asia Pacific and the US was some US$49(1) billion in 2005. IDC is forecasting that the value of this market will grow at a compound annual rate of 13.8%, between 2005 and 2010. The table below presents IDC’s forecast market value for the each of the five core BPO processes in Western Europe.(2)

Western Europe BPO Services Market, 2005-2010

45 39.8 40 R % CAG 14.7 35.2 35 30.9 16.3 16.4% CAGR 30 27.0 14.4 25 23.4 12.6 20.1 10.9 20 9.2 12.3% CAGR 7.6 14.5 15 12.9 11.5

Annual Spend US$ billions 10.3 10 9.1 8.1 14.6% CAGR 3.9 3.4 5 2.3 2.6 3.0 0.6 0.7 23.9% CAGR 2.0 0.4 0.5 15.6% CAGR 0.2 0.3 3.3 3.8 4.4 0 2.1 2.5 2.9 2005 2006 2007 2008 2009 2010 HR Procurement Finance & Accounting Customer Care Industry Specific 5APR200719452538 According to IDC, the Western European BPO market is expected to grow strongly, achieving a compound annual growth rate of 14.7% between 2005 and 2010. Procurement services are expected

(1) Source: IDC (Doc #2014178, Doc #BP01N and Doc #AP224107N). (2) Source: IDC—Western European BPO Services Market Forecast, 2005-2010, Doc #BP01N.

32 to deliver the strongest growth (23.9%) over this period, with industry specific processes achieving the second fastest rate of growth (16.4%). IDC is forecasting the total Western European market to be worth some US$39.8 billion in 2010. The UK market is considered to be the most mature in Western Europe with a broad understanding of BPO services and a higher level of acceptance of outsourcing generally. The rapid take-up of BPO services across the UK public and private sectors has yet to be reflected in the rest of Western Europe with relatively low penetration of the majority of continental European countries. According to the IDC data, the UK represented approximately 52% of the Western European market in 2006. The UK, Germany and France combined represented approximately 74% of the market in the same year. Banking and financial services is currently the single largest sector within BPO. However, IDC predicts that by 2010, BPO will have further penetrated a number of other vertical industries in the public and industrial sectors, significantly broadening the addressable market. Due to the standardisation and repeatability of the Group’s approach the Group believes that it is ideally positioned to take advantage of the increasing demand for BPO services.

5.2 Barriers to Entry Processes that companies outsource are often complex and integrated within the customers’ core operations. Outsourcing these processes requires a high degree of customisation and an in-depth understanding of such processes. Customers typically incur high switching costs to transfer outsourced processes back in-house, or to other BPO providers. As a result, BPO service providers benefit from long standing relationships with customers underpinned by multi-year contracts and embedded services. Given the long-term strategic nature of BPO engagements, companies undertake a highly rigorous process in evaluating potential BPO providers. The Group believes that a customer typically selects a BPO provider based on: Established reputation and industry or domain leadership; Demonstrated ability to execute a diverse range of complex business processes; Track record of execution experience; and Cultural fit. Importantly, these characteristics rely on reference sites demonstrating the experience of outsourcing complex processes, a reputation for delivery on contract promises and the ability to deliver low costs through economics of scale. Specific industry or process knowledge and compliance/regulatory approvals can provide further barriers to entry which, coupled with the combination of the need for an established reputation for successful BPO delivery, the long-term nature of BPO contracts and an inherent bias towards the incumbent service provider, creates barriers to entry for new market entrants.

5.3 Competition The Company believes that it is one of a limited number of international pure-play BPO services providers capable of undertaking large-scale, complex processes using standardised platforms. The Group’s primary international competitors are large IT services firms for whom BPO is not the core focus of their business, such as IBM. There are a limited number of other pure-play BPO companies, such as Genpact, WNS and EXL, that have emerged as ‘‘carve-outs’’ from other businesses; however, to date, the Group has seldom competed for business with them. Transaction processors such as ADP and First Data use standardised platforms to deliver a service focused on a specific outsourced process, but again the Group is rarely in direct competition for business with them due to the variety of complex, bespoke, industry specific processes which the Company targets. UK companies such as Capita provide complex BPO services, however, Capita’s stated strategy is to focus only on the UK BPO market. The Company’s offering is further differentiated from that of its competitors through the use of Partnering. Through its partnerships, the Company is able to share the risks and rewards of delivering large-scale, complex BPO processes with its customers that may not have been delivered

33 using standard outsourcing contracts. This can expand the traditional definition of the BPO market as it brings new services and processes into the BPO market, thereby increasing the Group’s overall addressable market.

6. BUSINESS MODEL 6.1 Full Suite of BPO Market Offerings The Group uses five main methods (the ‘‘Offerings’’) to contract for and deliver services to its customers: Partnering, Outsourcing, Products, Straight Through Processing and Business Support. Partnering is used for large-scale, complex outsourcing arrangements, creating service platforms which provide the Group with processing scale. The Group uses the other four Offerings to build on these service platforms. With Outsourcing, the Group takes on entire business processes from the customer onto existing service platforms offering a standard service. The Group’s Products Offering is the sale of standardised and repeatable software solutions. Business Support is the use of the Group’s experts to offer specific services from the platforms. Products and Business Support are also entry points that could lead to Partnerships or major Outsourcing arrangements. Straight Through Processing is extending the existing scope of services to other areas of the customer’s business. These five Offerings enable the Group to provide its customers with a broad range of contracting choice and type of service relationships, from cooperative partnerships, to fixed price contracts, to a single product or suite of services. In addition, in Partnering and procurement Outsourcing arrangements, the Group works closely with customers to develop a savings profile for the outsourced services, with these savings being shared between the Group and the customer. This sharing of savings is referred to as a ‘‘gain-share’’. For example, the Group may deliver an amount of procurement expenditure with a baseline cost of £20 million (representing the pre-outsourcing cost to the customer of the services to be provided); for a cost of £18 million, resulting in a savings of £2 million, which would be shared between the customer and the Group (i.e. the ‘‘gain-share’’). Details of the five Offerings are: 6.1.1 Partnering: Partnering is used for large and complex business processes. The Group creates a jointly owned company with the customer (its partner) that it calls an Enterprise Partnership. The resources and assets from the customer’s organisation are transferred into the EP in order to create a service platform. The Group has day-to-day operational and boardroom control of the EP and the partner has representation on the EP Board. Since its inception, the Group has established six EPs, of which four are currently in operation following the buyout of BAE Systems’ stake in the HR and Procurement EPs. The four remaining EPs have four different EP anchor partners: XCS: An EP with Lloyd’s to perform claims management and processing services; XIS: An EP with Lloyd’s and the IUA to perform premium and policy processing services; Xtb: An EP with Deutsche Bank to provide securities processing services; and XBS: An EP with Aon to provide claims handling, payment, settlement and related services. In early 2007, the Group bought BAE Systems’ 50% interests in the two EPs developed with them in 2001: XPS (a procurement service platform) and XHRS (a human resources service platform). The service agreements with BAE Systems for procurement and human resources services were extended to 2012. BAE Systems no longer has a partnership interest in either of these service platforms. Prior to an EP commencing operations, the employees and resources of the customer’s back-office function are transitioned to a new legal entity that becomes the EP. Other resources, such as office equipment, as well as agreements for the use of properties and existing IT systems may also be transferred into this entity. A service agreement is put into place between the EP and the customer (usually for a period of 10 to 12 years) to provide the customer with the agreed BPO services. The Group provides a software and IP licence agreement to the EP covering the use of the Group’s methodologies and software toolset to

34 be used by the EP, as well as a management and operating agreement under which the Group commits to provide people and services to manage and operate the EP. At this stage, the Group also commits to an ‘‘Implementation Investment’’, which is a commitment to provide internal expertise and, where appropriate, external resources in order to re-engineer business processes and operations. This investment occurs both before and during the Group’s operation of the EP. Following the completion of the foregoing steps, the Group takes operational control of the EP. During the period in which the EP is being created, the Group undertakes a detailed exercise to establish a ‘‘baseline’’ of the cost of the services to be provided by the EP (using the customer’s cost data), such that the EP is initially in a profit-neutral position (i.e. the price paid by the customer for the services under the service agreement is equal to the costs being incurred by the EP). Where appropriate, the terms of the EP contracts will provide for adjustment of the ‘‘baseline’’ costs six months after the start of the contract. The Group may commit to provide a minimum level of cost savings to the customer as part of the EP services agreement. These minimum cost savings form part of the customer’s profit share. These minimum cost savings are delivered through two principal mechanisms, depending on the nature of the EP: price discounts for services performed (for example, an agreement to provide securities processing at a decreasing base price over the period of the service contract) and rebates (for example, an agreement to provide guaranteed rebates to customers either by way of a fixed amount or a fixed percentage of revenue, which can increase over the period of the service contract). Both of these mechanisms result in a reduction of income for the EP, which places a greater incentive on the Group to reduce the cost base and/or supplement the EP with additional third party revenue in order to maintain profitability. In addition, the Group undertakes to the customer that, for all or part of the term of the EP, in the event the EP makes a net loss the Group will contribute funds to the EP to return the EP to a ‘‘no-loss’’ position. The Group may also, in certain cases, guarantee the performance by the EP of the service agreement with the customer. The charges for the services provided under the service agreement are paid by the customer to the EP, generally under a fixed price arrangement. For procurement arrangements, the customer may also pay an agreed administration fee to the EP. In return for the software and IP licence agreement the Group provides to the EP, the Group receives a royalty that is negotiated and agreed during the set-up of the contract (usually a fixed percentage of revenue). The Group also receives reimbursement for certain costs for services that have been performed on behalf of the EP (such as the costs of the senior management of the Group who perform services for the EP). After deduction of the royalty payments and discounts, the remaining profits are shared between the customer and the Group. Typically, prices, service fees and administration fees are indexed annually for inflation. The EP shareholder agreement is designed to terminate when either one of the EP partners buys out the other partner such that 100% of the EP share capital is owned by that partner. The Group’s preferred outcome is, at some point during the EP agreement period, to buy out an EP partner and to continue to provide services under an Outsourcing arrangement, as was done in early 2007 with the BAE Systems EPs. By acquiring 100% of the EP service platform, these buyouts result in the transition of the EP and give the Group full control whilst it continues to offer the EP services to the former partner and other parties. Some of the existing EP shareholder agreements include options for the partner to ‘‘put’’ its shares in the EP to the Group in defined circumstances based on a valuation which may include a minimum value. In defined circumstances such as particular defaults, change of control of the Group or failure to meet pre-agreed targets, the relevant partner may also have the option to call the Group’s shares in the EP for nil or limited consideration. The Group also has call options in limited cases in relation to some of its EPs. None of these options has been exercised. The EP contracts will typically include provision for termination for specified causes, including material breach, under-performance, force majeure, insolvency and related events. In addition, other rights to terminate such as for the customer’s convenience after a specified period or upon change of control may be included as part of the overall negotiated set of contracts.

35 6.1.2 Outsourcing: As with EPs, the principle behind the Group’s Outsourcing Offering is to reduce customers’ processing and procurement costs. Outsourcing involves the transfer of a business process or procurement spend from the customer’s organisation on to one of the Group’s existing platforms. The Group provides Outsourcing customers with services based on an agreed specification and usage charge and, for procurement expenditure, a ‘‘baseline’’ cost of items is also established (as with the EPs). In some circumstances, a customer may transfer people or assets to the Group as part of the Outsourcing arrangement, but unlike EPs the customer retains no ownership. In effect, the customers’ fixed costs are exchanged for a more variable- based cost for non-core functions. As part of the Group’s procurement Outsourcing agreements, it also targets a savings profile, the benefit of which is shared between the customer and the Group. Outsourcing contracts tend to run for five to seven years. Currently, the Group has outsourcing contracts with, inter-alia, Citibank and Sal. Oppenheim (for securities processing in Germany); BAE Systems, BAE Systems Australia, United Biscuits, Liberata, NAG and Boots the Chemists (for procurement); BAE Systems and University Hospital Birmingham (for human resources and payroll services); and Ascot (for insurance claims management). 6.1.3 Products: The Group’s Products consist of a range of business processing software products which provide customers with solutions that the Group believes are more efficient than the customer could develop internally. The Products can be tailored to the customer’s specific needs and support for the Products is also provided. The Group’s current range of Products include Genius, Elgar, Brokasure and IRIS (all insurance-related software Products) and CPS (which provides prices for financial products and derivatives to banks and fund managers). The Group’s insurance software Products were acquired as part of the acquisition of RebusIS in January 2004. As the Group develops standardised Products, these are licenced to its customers. The Group charges license fees, implementation fees and ongoing support and maintenance fees for the use of its Products. 6.1.4 Straight Through Processing: STP refers to additional services offered by the Group that lie outside of the scope of the original Outsourcing or EP contract. STP is a key characteristic of the Group’s business model in that it generates additional value by extending the scope and nature of the services provided to encompass more of the customer’s business. The Group invests in mapping its customers’ processes and procedures outside of the scope of the EPs or Outsourcing agreements, but which are closely linked to the services then being provided, to identify opportunities to create further value. These additional services are added around processes that the Group already understands, which allows the Group to standardise and optimise them rapidly in line with the existing services provided and to create additional revenues. STP services are initially priced at cost plus an agreed mark-up, which then becomes the agreed service price. Any implementation costs to the Group are recovered as part of the service charge. STP services tend to be recurring, providing the Group with incremental revenues from existing customers. 6.1.5 Business Support: The Group’s Business Support service is typically structured as a contractual relationship between the Group and its customers for a professional service or services using the Group’s employees. The Group offers experts for improving activities in the business processing value chain. Support is provided on a project-by-project or interim assignment basis to support improvement activities in customers’ processing activities. Generally, this encompasses smaller-scale functions that are put in place within (or without altering) the customers’ existing operations. The Business Support delivery method gives the customer access to the Group’s expertise on an as-needed basis, and gives the Group an opportunity to leverage the skills and expertise of its employees to generate revenue outside of large-scale contracts. The Group’s current range of Business Support services include programme management, IT implementation services (with a particular emphasis on the insurance sector), permanent and temporary recruitment services (predominantly to customers in the insurance sector), and corporate immigration services. Customers are charged for Business Support services based on the time and materials required or at a price

36 per transaction. Prices are determined taking into account the level of expertise of staff, degree of involvement and the achievement of the agreed key deliverables. The Group currently provides Business Support services to BAE Systems, Aon, Allianz, RSA, HSBC, three of the top five UK law firms and a number of other clients.

7. OPERATING STRUCTURE The Group provides BPO services to two industry sectors, Insurance and Financial Markets, and also provides cross-industry services such as HR, procurement and finance and accounting (‘‘Business Lines’’). These three operating segments are supported by the Group’s off-shore business processing facility (‘‘BPS’’) and ‘‘Corporate’’ which provides the infrastructure, resources and investment to sustain and grow the business, including sales and commercial, performance management, implementation and business management functions.

7.1 Insurance The Group’s Insurance platform is one of the leading providers of BPO services and software in international commercial insurance markets. In 2006, the Group handled over 560,000 claim transactions for the marine, aviation and non-marine sectors of the London insurance market, having a combined value of approximately £11.4 billion. The London insurance market is moving from paper based processing to electronic based processing and the Group’s infrastructure and services are capitalising on this development. The Group believes it is well placed for this transition and that it has the capability to continue to develop, maintain and support electronic processing systems for the commercial insurance market. The Group divides its Insurance products and services into five categories: complex processing, market infrastructure, accounting and settlement, software and related business support. For the year ended 31 December 2006, the Insurance sector had revenues (including inter-segment revenues) of £135.7 million and adjusted operating profit(1) of £23.2 million.

7.1.1 Complex Processing The Group’s complex processing and services include the following: Premium Processing: Service provided to both the Lloyd’s market and the London Companies market. Premium transactions are checked to ensure that appropriate authorisation for the transaction has been received and transaction data is entered, as appropriate, into the Lloyd’s market premium processing system and the London Companies market system where further automated validation is performed. Customers receive electronic signing messages for all valid transactions. Claims Processing and Agreement: Electronic data capture service provided on specific claims files. The Group’s main service involves taking data from paper files and entering data on computer record which is then sent to the customer. Claims Agreement for Followers: The Group undertakes the review of claims on behalf of Lloyd’s market underwriters subscribing to the risk, to ensure that claims are valid, according to the terms of coverage and are being handled to an appropriate professional standard. This is under-pinned by the Lloyd’s claims scheme. Policy Checking, Signing and Sealing Service: Service provided to the Lloyd’s market and the London Companies market. Policies prepared by the broker are technically checked to ensure completeness and accuracy and are returned to the broker upon completion. Where both the Lloyd’s market and the London Companies market share risk, separate policies are issued. The Lloyd’s market premium processing system and the London Companies market system are updated to reflect policy issuance. Policy Preparation: Policy preparation service provided to the Lloyd’s market. Policies are prepared, checked, signed and sealed on the basis of slips submitted by the broker and are returned to the broker on completion. This service is supported, as

(1) This is a non-GAAP measure extracted from note 5 of Section A of Part 5: Accountants’ Reports and Financial Information. Add-backs to operating profit comprise amortisation of intangible assets previously unrecognised by an acquired entity and share based payment charges.

37 appropriate, by the use of wordings held on the market wordings library and the Lloyd’s market premium processing system is updated to reflect policy issuance. In 2006, the Group transacted 10.3 million transactions, with a value of £46.8 billion in the premium processing category. The Group provides these services predominantly to Lloyd’s and the London Companies markets. The Group provides the premium processing, policy checking signing and sealing and policy preparation insurer and broker services through the XIS EP. The Group performs the claim processing and agreement and claims agreement for followers services for Lloyd’s insurance market through the XCS EP. In addition, the Group provides outsourced claims management services to a number of customers, including Ascot, delivered through the XCS EP division of the insurance platform. Revenues for the claims management services provided are derived from the individual contracts with the managing agent the majority of which are negotiated in relation to pricing on an annual basis.

7.1.2 Market Infrastructure The market infrastructure services include: Market Repository: Document management systems to enable the electronic distribution, storage and sharing of structured and unstructured insurance documentation. Messaging: Core market messaging systems to enable the electronic agreement and distribution of premium and claim information. Data Warehouse: Data management, information and reporting services. These services are provided predominantly to the Lloyd’s and London Companies market.

7.1.3 Accounting and Settlement The third category of services within the Insurance platform is accounting and settlement, which includes: Premium Settlement: the processing and distribution of settlement messages between brokers and insurers for premiums supporting settlement to a diversified market. Claim Settlement: the processing and distribution of settlement messages between brokers and insurers for claims supporting timely settlement to a diversified market. Accounting: the processing of accounting information supporting insurance transactions, including tax and regulatory data. Payment: the direct settlement of insurance transactions. These services are delivered to Aon through the XBS EP and to Lloyd’s and the IUA through the XIS and XCS EPs.

7.1.4 Software and Related Business Support The Group provides a suite of software products and related business support services to support all of its Insurance services offerings. The software products cover insurance companies, reinsurance companies, insurance brokers and other smaller products (primarily a predictive statistical risk-based product). The key Insurance software products are: Genius: general lines insurance and reinsurance underwriting system aimed at the international property and casualty market; IRIS: insurance and reinsurance underwriting system aimed at the Lloyd’s market; ELGAR: international reinsurance recovery and credit control system; and Brokasure: direct and reinsurance risk processing platform covering premium, claims, endorsement and insurance broking account processing.

38 Each of these products is owned, developed and sold to customers by the Group, and is commonly used in the commercial insurance industry. The Group’s software products are updated to meet the changing needs of customers. The Group’s hosting services allow insurance companies that do not have the critical mass for such capabilities to utilise its software service platforms for provision of servers and communications rooms. A customer who purchases software from Group’s service platform often uses the service platform for hosting services as well. The software division is supported by the Group’s IT estate consisting of three data centres, two IBM mainframes and 1,219 servers. The Group has significant software arrangements with customers including ACE, Allianz and AXA. The Group provides Insurance services at locations in the UK, and in India, the United States and Malaysia. The Group’s operations in India have grown rapidly over the past two years and currently support the Insurance sector by handling certain software development and support services and policy, premium, claims and accounts processing services. In addition, the Group has an agreement with a third party provider for certain offshore processing services. For more information on the regulatory environment in which Group’s Insurance sector, see Part 7: Regulation.

7.2 Financial Markets The Group’s Financial Markets services can be divided into banking operations and software. The banking operations services are provided both directly to the financial institution (e.g. Deutsche Bank) and on behalf of the financial institution directly to the end customer of the financial institution. These are undertaken by the Xchanging Transaction Bank (‘‘Xtb’’) which has a full German Banking Licence. For the year ended 31 December 2006, the Financial Markets sector had revenues (including inter-segment revenues) of £96.2 million and adjusted operating profit(1) of £12.5 million. Xtb is an EP which was entered into with Deutsche Bank in 2004. Deutsche Bank benefits from guaranteed discounts which increase over time to an agreed cap. The Group receives 100% of EP profit up to the level of the guaranteed discount. In the event that Xtb profits are in excess of the guaranteed rebate, amounts are distributed in accordance with equity shareholdings. The Group currently performs banking operations services for Deutsche Bank, Sal. Oppenheim and Citibank. The Group primarily offers its financial service offerings in Germany at its Frankfurt office, and through branch offices in Dusseldorf¨ and Ludwigsburg. In addition, some securities processing services are provided through its facility in India.

7.2.1 Banking operations The Group’s Banking operations include the following: Trades Processing: The Group provides settlement services for executed trades in relation to securities held in electronic format. For example, a trader in Deutsche Bank may execute an order to purchase a certain number of shares and place these securities in the portfolio of a customer. Xtb’s role is to ensure the executed order is settled on the customer’s behalf. Settlement includes ensuring the cash is debited in payment, the correct type and amount of the security is purchased on the exchange and the trade is booked properly. The majority of these tasks are normally processed automatically with the trade processing system, ‘‘ee2’’. However, where errors or exceptions occur, it is Xtb’s responsibility to act as the administrative intermediary between the relevant parties to resolve the issue and close the position. Vault & Coupons: This service is analogous to trades processing but for securities held in paper format. Principal activities include safekeeping of physical securities (held as common or specialised depository), processing of all related receipts and deliveries, checking of definitive bonds for certificates reported lost or stolen, authentication of new physical securities, clipping of physical coupons (e.g. dividend entitlement) and securely destroying bonds and coupons as required.

(1) This is a non-GAAP measure extracted from note 5 of Section A of Part 5: Accountants’ Reports and Financial Information. Add-backs to operating profit comprise amortisation of intangible assets previously unrecognised by an acquired entity and share based payment charges.

39 Corporate event processing: The Group provides the processing of complex dividend payments and corporate event processing for financial institutions. The ee2 processing system used by the Group includes modular components for announcement capture, data scrubbing, notification, entitlement, reconciliation, disbursements, claims and tax processing, workflow management, alerts and exception handling designed to achieve lower operational costs and increase efficiency. General meetings: The Group offers handling of corporate annual general meeting attendances, shareholder communications, and proxy voting on behalf of institutions and their customers. In 2006, over 300 annual general meetings were attended on behalf of the Group’s Financial Markets customers. Regulatory reporting: Reports are prepared to BaFin and other agencies on behalf of the customers. Static data: Customer standing data is maintained and updated. Tax: Annual reporting to end customer of portfolio profits/losses and tax information. Administering tax reclaim and tax relief at source schemes. Structured trades: Calculation/pricing of securities portfolios and exchange-traded derivatives for institutional customers. Other services: These include all manner of administrative services such as issuing of account statements for end customers, issuing duplicates, and archiving data.

7.2.2 Software The Group is a 10% shareholder in CAD IT, a quoted Italian company. CAD IT software is widely used in Italy and is well-suited to Italian banks and institutions. CAD IT services include licensing, implementation and customisation, maintenance, assistance, application management, training and technical consulting services. For more information on the regulatory environment in which the Group’s Financial Markets sector operates, see Part 7: Regulation.

7.3 Business Lines Business Lines is a cross-industry sector under which the Group currently provides human resources, procurement finance and accounting and IT hosting services. For the year ended 31 December 2006, the Business Lines sector had revenues (including inter-segment revenues) of £176.1 million and adjusted operating profit(1) of £14.2 million.

7.3.1 Human Resources The Group’s range of human resources services includes: Payroll: Fulfilling statutory requirements through the calculation, payment, reporting and delivery of payslips to customers. Pensions and Benefits Administration: Providing pensions administration, advice and support for a wide range of complex defined benefits and defined contribution schemes. Graduate Recruitment: Analysing customers’ recruitment needs and delivering tailored solutions that are customer specific. Training: Designing and delivering engineering and business apprentice training including initial assessment, induction, registration, training, further education and Scottish/National Vocational Qualification assessment.

(1) This is a non-GAAP measure extracted from note 5 of Section A of Part 5: Accountants’ Reports and Financial Information. Add-backs to operating profit comprise amortisation of intangible assets previously unrecognised by an acquired entity and share based payment charges.

40 Performance Management: The analysis, reporting and presentation of data that supports talent management and succession planning processes through an ‘‘e-enabled’’ appraisal process that captures performance and potential data. Resource Management: A complete resource management service, which includes associated processes for attraction, selection, appointment, induction and exit of the customer’s workforce. International Assignments: A repatriation and inpatriation service covering scenario testing, cost analysis, tax advice, location support and employee orientation. Learning and Development: Undertaking training needs analysis for the customer’s business and developing company-wide and specific team training plans, sourcing and delivering learning and development solutions and evaluating the success of such plans. Remuneration and Benefits: Working with customers to develop remuneration and benefits strategies and project-managing the execution of those strategies through annual and bespoke processes. HR Information Services: Maintaining employee data, providing bespoke and standard reports, conducting data reconciliation and identifying anomalies to maintain high levels of data integrity for customers. Other HR: Validation, production, quality assurance and despatch of correspondence and documentation relating to a range of HR Services outlined above. The Group currently provides human resource and payroll services and support to 1.5 million staff and their dependants, across multiple locations and countries. The Group’s primary customer is BAE Systems. The Group has recently added University Hospital Birmingham as a customer. In 2001, the Group established the XHRS EP for human resources services with BAE Systems. In January 2007, the Group bought BAE Systems’ interest in the EP and now the Group retains 100% of the profits. Human resources services are provided on-site at the customer’s facilities and at the Group’s Preston and Farnborough facilities in the United Kingdom. Through the acquisition of Ferguson Snell in April 2006, the Group also offers corporate immigration services in the UK. This acquisition enabled the Group to offer both its business and private customers assistance with UK immigration processes, including visas, work permits, residence permits, investing and naturalisation.

7.3.2 Procurement The Group’s procurement services fall into two categories: spend management and procure-to-pay. Spend Management: Spend management services comprise managing procurement on behalf of the customer. The Group either acts as an agent between the customer and the supplier (customers are invoiced directly by suppliers for the goods or services procured by the Group) or acts as the principal with the supplier, and sells the goods or services directly to the customer (the Group is invoiced by the supplier and in turn, invoices the customer). The Group handled £390 million of transacted spend (the value of goods and services procured on behalf of customers) in 2006, and procures goods and services in the following categories: technical and non-technical contract labour and recruitment, travel and fleet, office supplies, utilities, facilities, IT and telecoms, marketing, workplace, maintenance, repairs and operations (MRO) and professional services. The Group provides cost reduction benefits through lower cost buying on a like-for-like basis. The Group’s spend management customers include BAE Systems, BAE Systems Australia, NAG, United Biscuits, Boots the Chemists and Liberata. Procure-To-Pay: Procure-to-pay covers all processing aspects of procurement. As part of procure-to-pay, the customer transfers its purchase ledger control to the Group. This enables the Group to embed itself within the customer’s organisation. The

41 Group provides its procure-to-pay customers with the implementation and maintenance of a service platform for accounts payable. The service platform currently being developed by the Group is designed to be compliant with the Sarbanes-Oxley Act legislation, which the Group believes makes it attractive to customers in markets outside of the UK. The elements of the procure-to-pay services include processing of purchase requisitions, purchase orders and invoices, payment to suppliers, administration of travel and expense reports, implementation of purchasing cards, maintenance of data and tactical buying. The Group currently provides Boots the Chemists with procure-to-pay services and processed 220,000 invoices and one million purchase orders in 2006 through the procure-to-pay platform. The Group provides procurement services to its customers from its UK facilities in Preston and onsite services at customer locations, as well as administering its procure-to-pay services off-site at its facility in India. Procurement services are primarily provided on the Group’s XPS service platform. XPS was an EP created by the Group and BAE Systems in 2001; however, in March 2007, the Group purchased BAE Systems’ 50% interest in the EP and, like XHRS, the Group now has full ownership of the service platform.

7.3.3 IT Hosting IT hosting services are used to support the Group’s Insurance and Financial Markets software products, as well as for its procure-to-pay service platform. The Group’s key hosting services are: Management of Hosting Services: The Group provides the management of technology infrastructure services on behalf of its customers. The Group believes it provides superior and more cost effective services in this area than its customers would be capable of. Warehousing of Data: The Group provides extensive data warehousing facilities for its customers. The Group currently houses over 30 terabytes of information in its Basildon Data Centre. A prominent example is that the Group provides a data warehousing facility for Lloyd’s and the London Companies market which supports approximately 80 insurers and 60 brokers. Management and Support of Networks: The Group manages complex and international networks which provide connectivity to various markets. For example, the Group provides network services to the Lloyd’s and London Companies market insurance communities to deliver to them core central clearing services. The Group has complex international networks which enable its overseas offices to access services based in other countries such as Germany, Malaysia and India. Integration of Systems: The Group delivers systems integration services to a high level of quality and reliability in complex environments. The Group has delivered significant re-engineering of trading platforms and also offers technology architecture services to a significant customer base. Business Continuity Services: The Group offers business continuity services to customers. This offering ranges from business support services establishing the ‘‘Business Impact Assessment’’ following the denial of various business facilities through to the provision of office facilities for displaced staff. Disaster Recovery Services: The Group offers provision of contingency services for customers’ key technology platforms to ensure that the interruption of customers’ services is kept to a minimum in the event of an unexpected disruption to the primary technical platforms. The Group’s hosting services print 1.1 million payslips and process nearly £1.3 billion of payments each month. These services are currently provided to 71 external customers. The Group provides IT hosting services at its facilities in Basildon, UK; Frankfurt, Germany; and Gurgaon, India.

42 8. SALES METHODOLOGY Within each sector, the Group has sales teams dedicated to each of its Offerings (Partnering, Outsourcing, Products, Straight Through Processing and Business Support). It also has a ‘‘Global Partnering’’ team that looks for new Partnering opportunities which sit outside the three sectors. Over the last two years, the Group has made a major investment in upgrading and building up its sales teams. The business development process has five distinct phases through which each successful new BPO contract must pass: ‘‘Qualification’’ (or ‘‘door-opening’’) where the internal authorisation process is commenced and relationships with customers or potential customers are initiated or reactivated. ‘‘Interest’’ where discussions are held with the potential customer to identify relevant issues, facts and areas for possible improvement. ‘‘Shaping’’ where further information is collected from the potential customer in order to create a business proposal. ‘‘Validation’’ where a business case is written and commercial terms are agreed with the potential customer. ‘‘Conclusion’’ where the business plan and implementation plan are prepared, the legal contracts are drafted, negotiated and executed. This phased approach helps to develop and build a relationship with the customer, as the customer works together with the development team to create an arrangement that will address the customer’s needs. The Group believes that this cooperative approach also reduces the risks that the Group might miss issues that will hamper its ultimate delivery of service or that there is any misunderstanding with customers as to the scope of services to be provided. Further, the thoroughness of this process increases the likelihood that the Group will accurately project anticipated savings and so provide achieveable levels of guaranteed cost reductions in its contracts with customers. From start up, the operations are monitored very closely against a rigorous set of performance measures to ensure compliance with service, production quality, financial and other performance targets as well as customer satisfaction targets. The Group’s sales pipeline is tightly managed, updated continuously and formally reviewed at the monthly sales committee meeting for volume, velocity and quality.

9. EXECUTION APPROACH The Group employs a formal execution approach that embraces rigorous contracting, continual productivity improvement, increasing the scale of the platform by winning new third party revenue and measuring performance. The Group believes this approach establishes profitability and provides margin upside over time.

9.1 Overview 9.1.1 Rigorous contracting At the outset of major BPO arrangements, the Group seeks to convert a customer’s internal cost base to a defined set of services and production. The service definition is the baseline against which service delivery and improvement is measured. The definition is updated for changing services, new service classes and new customer types.

9.1.2 Productivity improvement The Group utilises a range of tools, techniques and methods to re-align and streamline production and improve service over time. This productivity improvement occurs though process optimisation, aggregation and arbitrage, as well as upgrading the quality of existing services.

9.1.3 Scaling the platform Following the implementation of productivity improvements, the Group seeks to capitalise on the spare capacity it has created through productivity improvement so that it can add

43 volume and revenues. In order to commercialise its platforms, the Group adds sales and relations expertise to secure the new revenues and volumes and quality management to assure consistent high standards are achieved in all service offerings.

9.1.4 Systematic performance measurement To sustain and enhance the margins the Group operates a detailed process of performance measurement. Performance measurement encompasses every aspect of the business: service, production, implementation, relations, sales and quality. The Group continuously measures performance at a detailed level to offer an overall view of the performance of each arrangement in a consistently thorough manner. This is reviewed monthly at the performance committee meeting.

9.2 Rigorous Contracting Beginning with the Validation and Conclusion phases of the Group’s sales methodology and continuing as the Group undertakes the realignment of the customer’s functions onto the Group’s standardised platform, the Group works to identify the services, customers, products, providers of services, resources used and costs needed for the proposed arrangement. The moment a contract is signed, the Group expects to begin the process of taking over the contracted services from the customer. Therefore, having a clear picture of the services to be provided and the production necessary to perform the contract is critical. The Group creates a baseline definition for both service and production. The service definition shows the classes of service delivered, the customer types and the standards of performance. The production definition shows the classes of resources, the supply types and the standards of operational delivery. The baseline then forms the basis of the Group’s operational measurement and control approach. These baselines represent the contractual specification of service, which is updated with customers as service requirements change over time. Having a clear picture of all of the elements of the contracted arrangement enables the Group to fix the baseline of costs and resources (assuming no change from cost to the customer before the Group’s involvement), which is used to establish cost savings and service improvements. In addition, the baseline allows the Group to quickly identify inefficiencies to target for productivity improvement, and to educate the customer in terms of existing process, cost and quality, so that improvements and opportunities for additional service can be shown over time, and billed for. These service and production definitions, as well as the baseline, become a part of the contracted arrangement with the customer and offer the Group an ‘‘as is’’ starting point from which to measure productivity improvements. In addition, they offer the Group a roadmap for the process of realigning the customer’s practices with the Group’s standardised approach.

9.3 Productivity Improvement Once the Group has defined a production baseline of resources, supply types and the costs, it seeks to re-align and streamline the resources and supply types and maximise use of the Group’s re-usable assets. The Group follows this with reassessments to find ways to further streamline and improve service. As the customer’s operations ‘‘taken over’’ by the Group are realigned to become consistent with the Group’s standardised approach, the Group focuses on three principal methods to improve productivity:

9.3.1 Process Optimisation The goal of process optimisation is to reduce significantly the amount of work necessary to provide the required services in order to create spare capacity. Process optimisation represents a continual focus on cycle time and error reduction and the removal of non value- added processes, which increase productivity and allow the Group to meet the needs of its customers. The Group’s process optimisation approach is based on Six Sigma methodology. The objectives of Six Sigma are to understand, simplify and optimise core processes in order to

44 reach a targeted maximum of 3.4 defects per million opportunities to create a defect (with the defects being defined by the customer). The Group applies Six Sigma process optimisation techniques to every partnership and across the entire operation, to drive productivity improvement at all levels. To support this, the Group trains 1.5% of its employees as full-time process improvement experts (known as ‘‘Black Belts’’ under Six Sigma). The Group maps the processes in detail and identifies where it can remove non-value added services, reduce cycle times and cut out re-work loops. This comprises the bulk of the process optimisation work and is undertaken during the early years of a major new partnership. It leads in subsequent years to process standardisation, which in turn enables capacity sharing and workforce flexibility. It is a goal of the Group, once the processes have reached a standardised state, to increase the degree of automation to improve efficiency levels further.

9.3.2 Aggregation Aggregation seeks to consolidate processes and services wherever possible and share spare capacity generated by productivity improvements. There are three ways the Group seeks to aggregate its production resources: within sites, across sites and across businesses:

9.3.2.1 Within-Site Aggregation The focus of within-site aggregation is to identify spare capacity within a production site. Overcapacity, by staffing each process for maximum demand, can be shared across processes through process optimisation, by workload scheduling and cross- process training, which together allow for the switching of spare capacity between different processes. In identifying and using such spare capacity, total performance at the site can be improved. For example, in the Financial Markets sector three investigation teams were combined providing a common approach and tools.

9.3.2.2 Across-Site Aggregation The Group creates generic process flows that become standard components used to support standardised services. Training employees to use these standard components allows resource sharing across different businesses. This is often achieved through the standardisation of services, which in turn enables the consolidation of resources. For example, when the Group took over BAE Systems’ human resource services, 34 sites that had been used to provide HR services by the various BAE Systems’ business units were consolidated such that only seven principal sites remain(1). This consolidation is made possible by having identical structures, functions and performance controls such that any site can replace its sister site. The Group also strives to aggregate indirect external spend by category of procurement. For example, for BAE Systems the Group has aggregated indirect spend from 13 business units and over 50 sites into a single, common framework of managed procurement spend. These categories of spend include travel, temporary labour and office consumables and furniture. The savings through standardising the specification, purchasing economies of scale and compliance are substantial.

9.3.2.3 Across-Business Aggregation Through its use of uniform processes, the Group also allows different areas within the Group to share resources through across-business aggregation. For example, the spare capacity generated through aggregation of human resources processes and services under the Group’s HR platform allows the Group to offer human resource services to its own businesses. In addition, the Group provides IT hosting services to the majority of businesses through its network of operations. Finally, the Group leverages its purchasing power and category expertise for indirect spend to reduce the input cost of its operating businesses.

(1) Based on sites with greater than seven employees.

45 9.3.3 Arbitrage Arbitrage exchanges higher for lower input costs. With arbitrage, the Group seeks to create value by ‘‘right-skilling’’, ‘‘near-shoring’’ and ‘‘offshoring’’.

9.3.3.1 Right-skilling Right-skilling describes a method of substituting over-qualified employees with employees trained in simplified processes. This provides cost savings and encourages greater enthusiasm for the job. The Group’s standardisation approach enables it to create processes which support right-skilling, and the right-skilling process optimises employee performance. This method uses natural attrition, promotion and performance management to create these benefits. It includes redeployment of experienced staff on to work that provides a proper return for their skill-set, rather than depending on redundancy.

9.3.3.2 Near-shoring Near-shoring moves work (rather than employees) between sites to obtain cost advantages. It allows the Group to avoid redundancies by releasing capacity at a particular site to serve new customers or perform other activities, another benefit of the standardised processes. As with right-skilling, this method uses re-deployment of spare capacity, performance management and natural attrition to realise the arbitrage benefit.

9.3.3.3 Offshoring Similarly, offshoring moves work (rather than employees) to India to gain further cost advantages. India offers costs per employee that are lower than those typically achievable in Western countries. However, the Group believes that maintaining customer service is paramount, so only certain processes are moved offshore, and the processes are only moved after they have been standardised and optimised locally. Currently, insurance policy and premium processing administration of the procure-to-pay systems, securities processing and insurance software development and support, have been relocated to India.

9.3.4 On-site, Off-site and Offshore Provision of Services To offer customers the most efficient, most tailored solutions possible, the Group utilises a mix of on-site, off-site and offshore facilities to deliver its products and services. As the Group looks for ways to aggregate the services provided to any customer (through consolidation and sharing of spare capacity) and to apply arbitrage to trade high costs for low costs, it selectively places functions on-site, off-site or offshore. This allows the Group to maximise savings while allowing its customers to keep critical functions on-site or nearby and transition others off-site or offshore to generate further savings and efficiencies. On-site services are offered in situations in which activities need to be carried out close to the customer or face-to-face interaction is desirable (such as in the handling of complex insurance claims). In order to serve its customers best, the Group provides its services at its customers’ locations or at its own facilities in a location near to the customer. For example, at the Group’s Leadenhall Street offices in the City of London where it provides a range of insurance services to brokers and underwriters. Off-site services are provided ‘‘on-shore’’ in a geographic region near the customer for functions that can be removed from the customer’s location and run from a less costly area, but still need to be provided locally. In the Insurance sector, the Group has transitioned certain insurance policy and premium processing, claims handling, software implementation and development, hosting and broking back office services to off-site facilities such as Chatham, United Kingdom. The ability to move to off-site facilities allows the Group to reduce costs, and, through consolidation, gain economies of scale for its platforms. The Group is able to achieve further cost savings by moving other services that are not required to be performed locally to its offshore facility in India. Currently, the Group offers

46 insurance policy and premium processing, administration of procure-to-pay services, securities processing and software development and support, offshore. In addition to the advantage of lower costs, moving processes offshore allows the Group to free up capacity at its on-shore sites which can be used for new services or processes or to service new customers. The Group believes that the expense of large scale redundancy programmes reduces the cost reduction benefits of moving people offshore and as a result seeks to use its STP model to leverage the spare capacity created by the movement offshore rather than make people redundant.

9.4 Scaling the Service Platforms As standardised, efficient and effective operations are developed through rigorous contracting and productivity improvements, the Group looks to build further economies of scale and enhance margins. As capacity becomes available though productivity improvements, it is employed to create incremental revenue for the Group. Incremental revenue can be derived by offering services to new customers as well as by offering new services to existing customers. The Group has been successful in generating incremental revenue onto its service platforms through each of the five offerings (Partnering, Outsourcing, Products, STP and Business Support).

9.5 Systematic Performance Management To manage the complexities and scale of the back office functions that the Group provides effectively, the Group believes that it is vital to ensure that all of its services and production methods are provided in a consistent manner. Furthermore, the Group believes that it should continuously look for Group-wide best practices and opportunities to adapt success in one area to the practices of other operations. Therefore, the Group has a formal and comprehensive performance management approach that embraces every aspect of any particular arrangement. The same performance management approach is adopted throughout the Group.

9.5.1 Performance measurement The Group measures performance at many points, across all of its functions in the same way. A formal monthly measurement reporting cycle reports the actual and perceived performance of any given function against the performance definition and baseline created for it, with updates for changing business conditions. These measurements are reviewed and made available within the Group’s ‘‘performance hubs’’ specifically set up to monitor and display performance, which enables operational management to assess improvements day-to-day.

9.5.2 Performance baseline setting Building on the service and production definitions developed as part of the customer contract, the Group develops a performance definition for all elements of its business. Each performance definition includes an analysis of the services to be provided to the customer, the production required to perform those services and the key performance measures. The performance definition captures both the ‘‘as is’’ status and the ‘‘should be’’ status for any given function. These performance definitions ultimately measure performance for each of the three sectors served by the Group.

9.5.3 Empirical and perceived measures of performance Performance is measured both empirically against the baselines and using perception measures. The empirical measurements of performance take into account pre-defined representative indicators of performance, such as indicators of a volume, value and quality nature for services. Perception measures of performance include both the judgment of the external customer and internal subject matter experts, to ensure that a balanced view is presented. The external and internal approach also allows the Group to identify gaps between empirical measures and perception and then to redress them.

47 9.5.4 Performance measurement benefits The Group’s standardised method of performance management helps the Group to chart large scale service offerings and the production needed to provide the services efficiently. In addition, it enables the Group to spot both performance deficiencies and opportunities for added value quickly. The Group believes that performance measurement is key in establishing and maintaining customer relationships, as well as critical to keeping its own staff aware of targets; as such, the Group’s performance is made transparent both within the Group and to customers.

10. INFORMATION SYSTEMS The Group’s business is predicated on the premise that the Group seeks to control the core information systems on which each business is built. These systems consist of different components depending on the sector in which the system operates but almost invariably at their core is a large IT asset that is used to deliver scale benefits to business processing services offerings. The Group has developed its IT assets using the methods described below. As a consequence of its unique Enterprise Partnership approach, the Group seeks to gain control of the IT processing assets critical to the operations of the business. Typically, these processing assets are mature, benefiting from heavy investment during the customer’s initial development and commissioning, and are operated on a business-as-usual basis at the time of a change of control to the Group. Principally, the role of the Group from the commencement of the Enterprise Partnership business is to act as the domain manager of the processing assets. The Group seeks to target its investment in the assets in order to improve the processing efficiency and lengthen their effective lifetime and thereby achieve maximum return from the previous investments. In this manner, the Group acts as a commercial manager in setting future technology direction. IT assets can also be acquired either through the acquisition of the business that owns them (as with the range of insurance software products and the financial system based on SAP obtained through the acquisition of RebusIS in 2004) or through the acquisition of assets directly (through the outright purchase or, in the case of application software, through acquiring a ‘‘development’’ licence which effectively gives the Group full control of that version of the software in the future). Finally, a number of the IT systems have been developed in-house either at Group level, consisting mainly of a series of portals and e-mail, office and financial systems, or have been developed by entities within the Group to support the business relevant to that entity. The Group has Data Centres in Basildon, Chatham, London and Frankfurt providing IT services such as payroll, hosting, printing, broking and document management for the Group. Other locations such as Preston, Folkestone and Gurgaon (India) have extensive hardware for IT services including mail, filing and development. Frankfurt is home to an extensive hardware inventory as well as a disaster recovery centre for Xtb. Xchanging UK Limited holds the Group’s central IT infrastructure, including the Group’s network, finance system, time recording system, e-mail and office systems. In this regard, the key information technology applications are licenced applications from Oracle (regarding the finance system) and Adeo (regarding the time recording system). In summary, the Group seeks to: Leverage and enhance existing IT assets obtained through acquisition or inheritance from Enterprise Partnerships as fully as possible through targeted investment. Avoid major technology replacement investments by enhancing existing platforms over time. Apply Group ‘‘re-usable assets’’ to enforce standardisation and repeatability.

11. INTELLECTUAL PROPERTY Registered Intellectual Property The Group is the owner of a number of registered trade marks including the marks XCHANGING, X (logo), INS-SURE, SERVICE 1ST (logo) and XCELLENCE (logo) which are registered under

48 the Community Trade Mark system (which covers the whole of the EU) in respect of relevant goods and services. The Group also has a number of national trade mark registrations for these trade marks, in particular in the USA and the UK. The Group does not register trade marks for all of the brands used in the Group’s business.

Unregistered Intellectual Property Part of the Group’s business involves the development of software which is used as part of the services it offers. Such software is developed largely by the Group’s employees. The Group also makes use of external contractors for software development.

Enterprise Partnerships The Group generally grants non-exclusive licences of the relevant intellectual property to the Enterprise Partnerships in return for royalties based on the revenue generated by the relevant Enterprise Partnership. Generally, intellectual property that is created by the Enterprise Partnership is licensed to the partner, and the Enterprise Partnership retains ownership of the intellectual property (save for improvements made to the Group’s intellectual property, which vests in the Group).

12. DATA PROTECTION The Group’s operations are subject to data protection laws. These laws place restrictions on the collection, use, international transfer and other processing of personal data and provide rights to individuals with regard to their personal data. Where the Group processes personal data on behalf of customers the customers will generally have primary responsibility but the Group may have some direct responsibilities for security. Customers generally impose specific contractual obligations regarding personal data on the Group. Xchanging has established a Group security function that is responsible for the production and maintenance of information security policies and standards applicable across the Group. A corporate information security policy, approved by the Board, is given effect by protocols and other documents addressing aspects of information security conformant to ISO 17799. The Group has country-specific data protection policies and protocols and is in the course of bringing these under a group wide data protection policy. The Group’s security officers provide advice on request, for example when new systems and processes are being developed. Appropriate awareness programmes are conducted across the Group and with targeted groups, including data protection. All relevant staff in India are trained in the European Data Protection Directive and specific requirements in the UK and German implementations thereof. Specific data protection responsibilities exist also within businesses. Technological countermeasures are installed to protect data confidentiality.

13. DIVIDEND POLICY The Company intends to adopt a dividend policy which reflects the growth prospects and cash flow generation of the Group, whilst maintaining an appropriate level of dividend cover.

49 PART 2: DIRECTORS, SENIOR MANAGERS, EMPLOYEES AND CORPORATE GOVERNANCE 1. DIRECTORS The Board currently comprises three Executive Directors and nine Non-Executive Directors. The Directors are as follows: Date appointed Notice Name Position to Board(1) Period John Robins F.C.T...... Non-Executive Chairman 22 March 2007 6 months David Andrews M.A., F.C.A...... Chief Executive Officer 27 June 2006 12 months Richard Houghton M.A., M.B.A...... Chief Financial Officer 27 June 2006 12 months Adele Browne A.C.A...... Executive Director, Sales and Commercial 22 March 2007 12 months David Hodgson M.B.A...... Non-Executive Director 27 June 2006 3 months Tom Tinsley M.B.A...... Non-Executive Director 27 June 2006 3 months Nigel Rich C.B.E., F.C.A...... Non-Executive Deputy Chairman 22 March 2007 3 months Stephen Brenninkmeijer B.A...... Non-Executive Director 22 March 2007 3 months Dennis Millard M.B.A., C.A. (SA) ...... Non-Executive Director 22 March 2007 3 months John Bramley M.A., F.C.A...... Non-Executive Director 22 March 2007 3 months Johannes Maret M.B.A., C.P.A...... Non-Executive Director 22 March 2007 3 months Friedrich Carl Janssen Dipl.-Kfm...... Non-Executive Director 22 March 2007 3 months The business address of each of the Directors is 13 Hanover Square, London W1S 1HN. The management expertise and experience of each of the Directors is set out below: John Robins (68), joined the Group in 1999 and is the Non-Executive Chairman. He retired as Group Chief Executive of Guardian Royal Exchange plc in 1999 after 15 years in the insurance industry. Prior to joining Guardian Royal Exchange, he spent 10 years as Group Financial Director of Willis Coroon plc and 5 years as Chief Executive Officer of Bally Group UK Limited. He is also Deputy Chairman of Alexander Forbes Limited. David Andrews (57), founded Xchanging and has served as the Chief Executive Officer of the Group since its formation in 1999. Prior to the creation of Xchanging, he was a board member of Andersen Worldwide and the Managing Partner of Andersen Consulting Western Europe. Mr Andrews built up Accenture’s (formerly Andersen Consulting’s) BPO business through the 1980s and 1990s, leading a number of large outsourcing contracts. During his tenure at Andersen Consulting, he held positions as Head of Financial Services (UK) and Head of the Telecommunications Practice (Global). He is also a non-executive director of the supervisory board of Deutsche Borse,¨ a Fellow of the Institute of Chartered Accountants and a William Pitt Fellow of Pembroke College, Cambridge. Richard Houghton (48), joined the Group in early 1999 and was appointed as Chief Financial Officer, with responsibility for Finance, Legal and Group Implementation in 2003. Before joining the Group, Mr Houghton worked at Caradon plc where he was Chief Executive Officer of the Industrial Products Division and was responsible for the realignment of their overall business portfolio. He graduated in Chemical Engineering from Cambridge and began his career at Esso before completing his MBA at Harvard. He subsequently spent 5 years working in consulting at McKinsey and Company. Adele Browne (38), joined the Group in July 1999 and is currently Executive Director of Sales and Commercial, responsible for shaping and structuring the commercial aspects of the Group’s partner and customer arrangements. Prior to joining the Group, Ms Browne worked in Corporate Finance at Lazard Brothers. She started her career at PricewaterhouseCoopers, where she qualified as a chartered accountant. David Hodgson (50), joined the Group in 1999 as a Non-Executive Director. Mr Hodgson is a Managing Director of General Atlantic LLC, where he has been since 1982 and he is a member of the firm’s investment and executive committees. He also serves as a director of a number of public and private companies, including Dice, Inc., InsightExpress, Inc., ipValve, Northgate Information Solutions plc and TriNet.

(1) Each of the board directors joined the Group prior to these dates as described in the above biographies.

50 Tom Tinsley (53), joined the Group in 2000 as a Non-Executive Director. Mr Tinsley is currently a Managing Director of General Atlantic LLC and also serves on the boards of BMC Software, Philanthropic Research, Inc. and Critical Path, Inc. During 1995 to 1999 he held various executive positions with Baan Company, NV, a leading provider of Enterprise Software Solutions, including Chairman and Chief Executive of the Management Board. Prior to joining Baan, he was a director at McKinsey and Company, where he was employed for 18 years. Nigel Rich (61), joined the Group in November 2006 and is the Non-Executive Deputy Chairman. He is Chairman of Slough Estates plc, a property investment and development company, Deputy-Chairman of Asia House and Co-Chairman of the Philippine British Business Council. His other non-executive directorships include Pacific Assets Trust plc, KGR Absolute Return PCC, John Armit Wines Limited and Matheson & Co. Limited. In 1974 he joined Jardine Matheson in Hong Kong and subsequently held management positions before becoming Finance Director and then Managing Director of Hong Kong Land. From December 1988 to 1994 he was Managing Director of Jardine Matheson and in 1994, he became Group Chief Executive of Trafalgar House until it was taken over in 1996. He is a Fellow of the Institute of Chartered Accountants and was awarded a CBE in 1995. Stephanus (Stephen) Brenninkmeijer (51), became a Non-Executive Director in 2000. Mr Brenninkmeijer was Managing Director of Cardex Europe, a division of the Mondial Organisation, which is the importing division of C&A Europe until 2001. He founded the Andromeda Fund in 2002, a venture capital fund investing in entrepreneurs with a direct link to the emerging markets. Andromeda is part of the Entrepreneurs Fund BV that is owned by COFRA Holding AG. He was founding Chairman of NFTE UK (Network of Teaching Entrepreneurship), which merged with Business Dynamics in July 2006. Both organisations created the Enterprise Education Trust in November 2006 of which Mr Brenninkmeijer is Deputy Chairman. He earned his degree at the European Business School in Germany. Dennis Millard (58), joined the Group in 2005 as a Non-Executive Director and was appointed Chairman of the Audit Committee in 2006. Mr Millard was Group Finance Director of Cookson Group PLC from 1996 until 2005. His previous executive positions include that of Finance Director of Medeva PLC from 1994 to 1996 and directorships at the Plate Glass Group, a South African public company, from 1980 to 1993. He was a non-executive director and chairman of the audit committee of both Exel PLC from 2003 to 2005 and Arc International PLC from 2000 to 2003. Mr Millard is also currently Deputy Chairman and senior independent director of Smiths News PLC and a non-executive director and chairman of the audit committee of Debenhams PLC. He is a member of the South African Institute of Chartered Accountants. John Bramley (67), joined the Group in 1999 as a Non-Executive Director. He was formerly the Finance Director of BP’s Worldwide Exploration and Production group, where he played a significant part in the outsourcing of BP’s Finance and Accounting. Mr Bramley qualified as a chartered accountant with Ernst & Young. His career with BP was financially based and encompassed the upstream, downstream and central activities of the company. Johannes Maret (56), joined the Group in 2003 as a Non-Executive Director. Mr Maret is also Managing Director of Maret GmbH and an Advisor and Non-Executive Director of the investment committee of the Triton fund, a mid-market European buy-out fund. Prior to joining the Group, Mr Maret was a partner in, and Chief Financial Officer of, Sal. Oppenheim jr. & Cie. KGaA, where he was responsible for banking and administration and was a member of the supervisory board of European Transaction Bank (now called Xtb). Friedrich Carl Janssen (62), became a Non-Executive Director in February 2005 when Sal. Oppenheim jr. & Cie. KGaA, in which he is one of the five General Partners, became a shareholder of Xchanging B.V. In 1974 Mr Janssen became a partner in the law and audit firm Gurland, Schlutter,¨ Luer¨ and Janssen. In 1983 he was appointed to the Executive Board of KPMG Germany. From 1990 until 1994 he was a member of the Management Board of Kaufhof Holding AG, part of the Metro Group. He subsequently joined Arthur Andersen & Co. GmbH as the lead partner for the western region of Germany and a member of the Operating Committee, later becoming a member of the Global Supervisory Board. He is currently a supervisory board member of Ernst & Young AG, Interseroh AG, AXA Service AG, Content Management AG, gardeur AG and Deutsche Hypothekenbank AG.

51 2. SENIOR MANAGERS In addition to the executive management on the Board of the Company, the following senior managers (the ‘‘Senior Managers’’) are considered relevant to establishing that the Company has the appropriate expertise and experience for the management of its business:

Name Position David Rich-Jones ...... Executive Director – Business Lines Sector Steven Beard...... Executive Director – Insurance Sector Mike Margetts ...... Executive Director – Financial Markets Sector Clive Buesnel...... Executive Director – Group Relations Hugh Morris ...... Executive Director – Sales and Relations, Business Lines Sector Stephen Bowen...... Executive Director – Sales and Service Melissa Pitt ...... Group HR Director Gary Whitaker...... Company Secretary and General Counsel The business address of each of the Senior Managers is 13 Hanover Square, London W15 1HN. The average age of the Senior Managers is 41. The management expertise and experience of each of the Senior Managers is set out below: David Rich-Jones is the Group’s Executive Director responsible for the Business Lines Sector. He joined the Group in April 2000 to establish Procurement Services, having previously been Group Purchasing Director of the building products group Caradon plc. Prior to joining Caradon, he was Vice President, Global and Strategic Purchasing at Smithkline Beecham and was Group Purchasing Director (IT) for National Westminster Bank plc. Mr Rich-Jones commenced his career in Manufacturing with GEC Marconi as a sponsored graduate, and then joined Raytheon Ltd to work in Manufacturing and Supply Chain Management. He is a prior member of the Council and Board of Management of the Chartered Institute of Purchasing and Supply. Steven Beard has served as the Group’s Executive Director for Insurance since July 2006. Mr Beard started his career in finance and has since held director level positions in insurance, technology and venture capital companies. He joined the Group in 2002 to lead the XCS business through realignment and streamlining and has held a number of senior positions since then. Prior to joining the Group, Mr Beard’s previous roles included Finance Director of a division of XL Capital and executive director and CFO of GlobalWave Group plc. Mr Beard is a Fellow of the Association of Chartered Certified Accountants. Mike Margetts joined the Group in 2000 as the head of Implementation and was appointed COO of XHRS in 2001, Head of Production at Xtb in 2003 and Corporate Director in 2005, before progressing to his current role as Executive Director of Xchanging’s Financial Markets Sector, responsible for its overall growth and performance. Before joining the Group, Mr Margetts commenced his career in the Financial Markets sector with Accenture, before becoming European Head of Project Services at CSFB, responsible for implementing a series of cross-functional projects to improve the Bank’s control environment and cost efficiency. Mr Margetts is an ACMA. Clive Buesnel joined the Group in 2000, serving as Head of Technology and Head of London Market Services before progressing to his current role as Relations Director with responsibility for Global Relationships and Insurance Sales. Mr Buesnel is a qualified Production Engineer and joined the Group from British American Tobacco where he was Head of Marketing IT. Prior to that he spent 7 years at Andersen Consulting where he programme managed major IT implementations for European Banks. He also worked for Mars, Inc. as a European Business Systems Manager responsible for design and implementation of sales and marketing systems across Europe. Hugh Morris joined the Group in 2003 and served as Managing Director of Xchanging HR Services and Executive Director for Global Delivery, before becoming the Executive Director for Business Lines Sales and Relations in the UK in 2007. Mr Morris has more than 15 years experience in outsourcing and related business activities. He started his career at Arthur Andersen & Co. Management Consultants in 1980, and was promoted to partner in Andersen Consulting, in 1991. From 2001 to 2003, he was the Operations Director for QA plc, where he was responsible for all aspects of QA’s training, outsourcing and consulting businesses.

52 Stephen Bowen joined the Group in 2000 and has worked in many roles including Head of Technology, Head of Service for Xtb, Head of Global Investment and more recently the Group’s Executive Director Sales and Service. Before joining Xchanging, Mr Bowen was at Accenture (formerly Andersen Consulting) where he was made Manager in 1993 and Associate partner in 1998. With Andersen Consulting Mr Bowen specialised in the delivery of major strategic change to the retail industry working with major brand names in the US, South Africa, Sweden, France, Germany and the UK. Mr Bowen is a Kitchener and National Engineering Scholar. Melissa Pitt joined the Group as Learning and Development Director in March 2003 before becoming the Group HR Director. Prior to joining the Group, Ms Pitt worked at KPMG Consulting in the Mergers and Acquisition Integration Practice, focusing on issues such as training, cross-cultural realignment, communications and recruitment. Gary Whitaker has served as the Group’s General Counsel and Secretary to the Board since joining the Group in 2001. Prior to joining the Group, Mr Whitaker was a corporate lawyer with Norton Rose Solicitors, working in both the London and Moscow corporate finance departments. Prior to his legal career, he was a commissioned officer in the Royal Navy, serving as aircrew in the fleet air arm.

3. COMPENSATION 3.1 The aggregate total remuneration accrued in respect of the financial year ended 31 December 2006 (including contingent or deferred compensation) and benefits in kind granted (under any description whatsoever) to each of the Directors by members of the Group was £1,469,300. 3.2 The remuneration received by the Directors for the year ended 31 December 2006 was as follows: Name Fee/Basic salary Bonus Benefits Total Directors John Robins...... £125,000 — — £125,000 David Andrews...... £500,000 — £11,408 £511,408 Richard Houghton...... £330,000 — £7,761 £337,761 Adele Browne ...... £300,000 — £6,483 £306,483 David Hodgson ...... — — — — Tom Tinsley ...... — — — — Nigel Rich...... £25,000 — — £25,000 Stephen Brenninkmeijer ...... £40,000 — — £40,000 Dennis Millard ...... £46,936 — — £46,936 John Bramley ...... £40,000 — — £40,000 Johannes Maret(1) ...... £34,077 — — £34,077 Friedrich Carl Janssen(2) ...... £2,635 — — £2,635 3.3 In respect of the financial year ended 31 December 2006, the aggregate total remuneration accrued (including contingent or deferred compensation) and benefits in kind granted (under any description whatsoever) to each of the Senior Managers by members of the Group was £1,862,348. 3.4 The total amount set aside or accrued by the Group to provide pension, retirement or other benefits to the Directors and Senior Managers in the year ending 31 December 2006 is £73,231.

(1) Johannes Maret’s fees in respect of the financial year ended 31 December 2006 were received as a consultant of Xchanging GmbH. The fees of A50,000 were converted into pounds sterling at the average exchange rate for the year (A/£1.46725). Further details of Mr Maret’s consultancy arrangement with the Group are set out in paragraph 7.2.6 of Part 8: Additional Information. (2) Friedrich Carl Janssen’s fees in respect of the financial year ended 31 December 2006 were received for his supervisory board membership at Xtb. The amount he received was A3,866.28 and has been converted into pounds sterling at the average exchange rate for the year (A/£1.46725).

53 4. EMPLOYEES The average number of full-time equivalent employees of the Group for the financial years ended 31 December 2004, 2005 and 2006 is set out below:

Financial Financial Financial Category of activity Year 2004 Year 2005 Year 2006 Business Lines ...... 635 726 863 Insurance...... 1,187 1,276 1,471 Financial Markets ...... 511 875 810 Other...... 132 239 305 Average number of persons (including Executive Directors) employed ...... 2,465 3,116 3,449

Location by Country on Average: Germany...... 511 875 810 India...... 137 232 356 Malaysia...... 28 25 18 Thailand ...... 2 2 1 USA ...... 29 32 23 Australia ...... — 1 4 France ...... 2 5 8 UK...... 1,756 1,944 2,229 2,465 3,116 3,449

The Group formally recognises AMICUS MSF in the UK. The recognition covers the Group’s professional grades within XHRS’ legal entities, collective bargaining and negotiations regarding terms and conditions and salary. In Germany, under German law (‘‘Betriebsverfassungsgesetz’’) the employees within the Xtb are represented by the Workers’ Council, which is a forum of Xtb staff elected to the role for a period of 4 years. The current representatives were elected with a majority of 70% in March 2006 and act independently, i.e. they do not represent a specific union. The Workers’ Council remit covers a number of corporate elements (e.g. terms and conditions, internal organisation) as well as individual elements (e.g. recruiting approvals, transfer of staff, termination).

5. CORPORATE GOVERNANCE The Company intends to comply with the Combined Code other than as set out in this paragraph 5. The Combined Code recommends that at least half the members of the board of directors (excluding the chairman) of a public limited company incorporated in England and Wales should be independent in character and judgment and free from relationships or circumstances which are likely to affect, or could appear to affect, their judgment. The Combined Code also recommends that the board of directors should appoint one of the independent non-executive directors as senior independent director and Nigel Rich has been appointed to fill this role. The senior independent director should be available to shareholders if they have concerns which contact through the normal channels of chairman, chief executive or finance director has failed to resolve or for which contact is inappropriate. Currently, the Board is composed of twelve members, consisting of the Chairman, three Executive Directors and eight Non-Executive Directors, four of whom are independent. Tom Tinsley, David Hodgson, Johannes Maret and Friedrich Carl Janssen are deemed by the Board not to be independent under the Combined Code. Friedrich Carl Janssen is deemed not to be independent as he is a director of Sal. Oppenheim which on Admission will be a 2.2% shareholder in the Company, a 5% shareholder in Xtb and a customer of Xtb. Johannes Maret is deemed not to be independent as he has been a consultant to Xtb since June 2003 and will continue to be a consultant to the Group following Admission. Tom Tinsley and David Hodgson will remain on the Board following Admission as the General Atlantic Directors pursuant to the Relationship Deed between the Company and General Atlantic, a summary of which is set out in paragraph 18.13 of Part 8: Additional Information. Johannes Maret and Friedrich Carl Janssen will remain on the Board following Admission because

54 the Board considers that the Group will continue to benefit from their extensive contacts, experience and knowledge in connection with the business community in Germany. It is intended that by the AGM of the Company held in 2008, John Robins and John Bramley will have retired as directors and that Nigel Rich will have replaced John Robins as Chairman. Suitable replacement non-executive directors will be appointed to the Board. The Chairman’s role is to ensure good corporate governance. His responsibilities will include leading the Board, ensuring the effectiveness of the Board in all aspects of its role, ensuring effective communication with shareholders, setting the Board’s agenda and ensuring that all Directors are encouraged to participate fully in the activities and decision-making process of the Board. On Admission, the Company will not comply with the provisions of the Combined Code that at least half the Board (excluding the Chairman) should comprise independent non-executive directors. The Board intends to work towards full compliance with the requirements of the Combined Code following the Global Offer. The Board will report to shareholders with progress on implementing its plan for achieving compliance. As envisaged by the Combined Code, the Board has established Nomination, Remuneration and Audit Committees, with formally delegated duties and responsibilities with written terms of reference. From time to time, separate committees may be set up by the Board to consider specific issues when the need arises.

Nomination Committee The Nomination Committee assists the Board in discharging its responsibilities relating to the composition and make up of the Board. It is also responsible for periodically reviewing the Board’s structure and identifying potential candidates to be appointed as directors of the Company as the need may arise. The Nomination Committee is responsible for evaluating the balance of skills, knowledge and experience on the Board, the size, structure and composition of the Board, retirements and appointments of additional and replacement directors and will make appropriate recommendations to the Board on such matters. The Combined Code provides that a majority of the members of the Nomination Committee should be independent non-executive directors. The Company’s Nomination Committee is composed of seven members, four of whom are independent non-executive directors (namely John Bramley, Stephen Brenninkmeijer, Dennis Millard and Nigel Rich), David Hodgson (who is not considered to be independent), John Robins (the Chairman) and David Andrews (Chief Executive Officer). The Chairman of the Nomination Committee is John Robins. The Company, therefore, considers that it complies with the Combined Code recommendations regarding the composition of the Nomination Committee. The Nomination Committee will meet formally at least twice a year and otherwise as required.

Remuneration Committee The Remuneration Committee assists the Board in determining its responsibilities in relation to remuneration, including making recommendations to the Board on the Company’s policy on executive remuneration, determining the individual remuneration and benefits package of each of the executive directors and recommending and monitoring the remuneration of senior management below Board level. The Combined Code provides that the Remuneration Committee should consist of at least three members who are all independent non-executive directors. The membership of the Company’s Remuneration Committee comprises six non-executive directors (namely Nigel Rich, John Bramley, Stephen Brenninkmeijer, Dennis Millard, John Robins and Tom Tinsley). The Chairman of the Remuneration Committee is Nigel Rich. As Tom Tinsley is not considered to be an independent non-executive director, on Admission, the Company will not comply with this recommendation of the Combined Code. The Remuneration Committee will meet formally at least twice a year and otherwise as required.

Audit Committee The Audit Committee assists the Board in discharging its responsibilities with regard to financial reporting, external and internal audits and controls, including reviewing the Company’s annual

55 financial statements, reviewing and monitoring the extent of the non-audit work undertaken by external auditors, advising on the appointment of external auditors and reviewing the effectiveness of the Company’s internal audit activities, internal controls and risk management systems. The ultimate responsibility for reviewing and approving the annual report and accounts and the half-yearly reports remains with the Board. The Combined Code recommends that the Audit Committee should comprise of at least three members who should all be independent non-executive directors, and that at least one member should have recent and relevant financial experience. The membership of the Company’s Audit Committee comprises four independent non-executive directors (namely Dennis Millard, John Bramley, Stephen Brenninkmeijer and Nigel Rich). Dennis Millard is considered by the Board to have recent and relevant financial experience. The Chairman of the Audit Committee is Dennis Millard. The Company therefore considers that it complies with the Combined Code recommendations regarding the composition of the Audit Committee. The Audit Committee will meet formally at least three times a year and otherwise as required.

6. MODEL CODE Upon Admission, the Company will adopt a code of securities dealings in relation to the Shares which is based on, and is at least as rigorous as, the Model Code as published in the Listing Rules. The Share Dealing Code adopted will apply to the Directors and other relevant employees of the Group.

56 PART 3: THE GLOBAL OFFER 1. THE GLOBAL OFFER Under the Global Offer, the Company will issue 31,250,000 New Shares and the Selling Shareholders will sell 52,936,874 Existing Shares. In addition, a further 12,628,031 Existing Shares will be made available by General Atlantic pursuant to the Over-allotment Option described below. The New Shares represent approximately 15% of the issued ordinary share capital of the Company upon Admission. The New Shares being issued by the Company will rank pari passu in all respects with the Existing Shares, including the right to vote and the right to receive all dividends and other distributions declared, made or paid on the Company’s share capital after Admission. The Shares will, immediately following Admission, be freely transferable under the Articles of Association. The Global Offer is fully underwritten by the Underwriters. Immediately following Admission, it is expected that 41.0% of the Shares will be held in public hands, assuming no exercise of the Over-allotment Option, and 47.1% if the Over-allotment Option is exercised in full. The Global Offer is being made by means of an offer of Shares to certain institutional investors in the United Kingdom and elsewhere outside the United States and by way of an offering of Shares in the United States to QIBs pursuant to Rule 144A or another exemption from, or transaction not subject to, the registration requirements of the Securities Act. Certain restrictions that apply to the distribution of this document and the Shares being issued and sold under the Global Offer in jurisdictions outside the United Kingdom are described in paragraph 14 of Part 8: Additional Information. When admitted to trading, the Shares will be registered with ISIN number GB00B1VK7X76 and SEDOL number B1VK7X7.

2. REASONS FOR THE GLOBAL OFFER AND USE OF PROCEEDS The Global Offer, Admission and issue of New Shares will allow the Group to fund its future growth through establishing new Enterprise Partnerships, developing its business through its other delivery methods and selectively acquiring businesses. The Group believes it will also further raise the profile of the Group and assist in retaining and incentivising employees. In addition, the Selling Shareholders will realise part of, and in the case of BAE Systems, all of their investment in the Group. The gross proceeds the Company expects to receive from the issue of New Shares pursuant to the Global Offer are £75 million. After deducting underwriting commissions (assuming that the full discretionary fee is paid to the Underwriters) and other estimated fees and expenses incurred in connection with the Global Offer, the Company expects to receive net proceeds of £65 million. The Company will not receive any proceeds from the sale of Existing Shares or Over-allotment Shares by the Selling Shareholders.

3. ALLOCATION AND PRICING Allocations of Shares under the Global Offer will be determined at the sole discretion of the Company (following consultation with the Joint Global Co-ordinators). A number of factors will be considered in deciding the Offer Price and the bases of allocation under the Global Offer, including the level and the nature of the demand for Shares and the objective of encouraging the development of an orderly after-market in the Shares. All Shares issued or sold pursuant to the Global Offer will be issued or sold at the Offer Price. Upon notification of any allocation, prospective investors will be contractually committed to acquire the number of Shares allocated to them at the Offer Price and, to the fullest extent permitted by law, will be deemed to have agreed not to exercise any rights to rescind or terminate, or otherwise withdraw from, such commitment. Dealing may not begin before notification is made. The rights attaching to the Shares will be uniform in all respects and will form a single class for all purposes. The proportions in which particular allocations of Shares under the Global Offer will

57 comprise Existing Shares and New Shares may vary at the sole discretion of the Company (following consultation with the Joint Global Co-ordinators). Liability for UK stamp duty and stamp duty reserve tax is described in paragraph 12 of Part 8: Additional Information.

4. OVER-ALLOTMENT AND STABILISATION In connection with the Global Offer, the Stabilising Manager, or any of its agents, may (but will be under no obligation to), to the extent permitted by applicable law, over-allot and effect other transactions with a view to supporting the market price of the Shares at a level higher than that which might otherwise prevail in the open market. The Stabilising Manager is not required to enter into such transactions and such transactions may be effected on any stock market, over-the-counter market or otherwise. Such stabilising measures, if commenced, may be discontinued at any time and may only be taken during the period from the date of publication of the Offer Price and ending 30 days thereafter. Save as required by law or regulation, neither the Stabilising Manager nor any of its agents intends to disclose the extent of any over-allotments and/or stabilisation transactions under the Global Offer. In connection with the Global Offer, the Stabilising Manager, may, for stabilisation purposes, over-allot Shares up to a maximum of 15% of the total number of Shares comprised in the Global Offer. For the purposes of allowing it to cover short positions resulting from any such over-allotments and/or from sales of Shares by it during the stabilising period, the Stabilising Manager has entered into the Over-allotment Option with General Atlantic pursuant to which the Stabilising Manager may, on behalf of the Underwriters, purchase or procure purchasers for the Over-allotment Shares at the Offer Price. The Over-allotment Option is exercisable in whole or in part, upon notice by the Stabilising Manager, at any time on or before the day that is 30 days after the date of publication of the Offer Price. Any Over-allotment Shares made available pursuant to the Over-allotment Option will be purchased on the same terms and conditions as the Shares being sold or issued in the Global Offer and will form a single class for all purposes with the Shares. For a discussion of certain stock lending arrangements entered into in connection with the Over-allotment Option, see paragraph 7.3 of this Part 3: The Global Offer.

5. DEALING ARRANGEMENTS The Global Offer is subject to the satisfaction of certain conditions contained in the Underwriting Agreement which are typical of an agreement of this nature including Admission occurring and becoming effective by 8.00 a.m. (London time) on 30 April 2007 or such later date or time (not being later than 18 May 2007) as the Company may agree with the Joint Global Co-ordinators and to the Underwriting Agreement not having been terminated. Further details of the Underwriting Agreement are set out in paragraph 7 of this Part 3: The Global Offer. Application has been made to the FSA for all the Shares to be listed on the Official List and application has been made to the London Stock Exchange for the Shares to be admitted to trading on the London Stock Exchange’s market for listed securities. It is expected that Admission will take place and unconditional dealings in the Shares will commence on the London Stock Exchange at 8.00 a.m. (London time) on 30 April 2007. Settlement of dealings from that date will be on a three day rolling basis. Prior to Admission, it is expected that dealings in the Shares will commence on a conditional basis on the London Stock Exchange on 25 April 2007. The earliest date for settlement of such dealings will be 30 April 2007. All dealings between the commencement of conditional dealings and the commencement of unconditional dealings will be on a ‘‘when issued basis’’. If the Global Offer does not become unconditional in all respects any such dealings will be of no effect and any such dealings will be at the risk of the parties concerned. These dates and times may be changed. Each investor will be required to undertake to pay the Offer Price for the Shares sold or issued to each investor in such manner as shall be directed by the Joint Global Co-ordinators. It is expected that Shares allocated to investors in the Global Offer will be delivered in uncertificated form and settlement will take place through CREST on Admission. No temporary documents of title will be issued. Dealings in advance of crediting of the relevant CREST stock account shall be at the risk of the person concerned. It is intended that, where applicable, definitive share certificates in respect of the Global Offer will be distributed from 14 May 2007 or as soon thereafter as practicable.

58 In connection with the Global Offer, each of the Underwriters and any affiliate acting as an investor for its own account may take up the Shares and in that capacity may retain, purchase or sell for its own account such securities and any securities of the Company or related investments and may offer or sell such securities or other investments otherwise than in connection with the Global Offer. Accordingly, references in this document to the Shares being offered or placed should be read as including any offering or placement of securities to any of the Underwriters and any affiliate acting in such capacity. The Underwriters do not intend to disclose the extent of any such investment or transactions otherwise than in accordance with any legal or regulatory obligation to do so.

6. CREST CREST is a paperless settlement procedure enabling securities to be transferred from one person’s CREST account to another without the need to use share certificates or by written instruments of transfer. On Admission, the Articles of Association will permit the holding of Shares under the CREST system. The Company has applied for the Shares to be admitted to CREST with effect from Admission. Accordingly, settlement of transactions in the Shares following Admission may take place within the CREST system if any shareholder so wishes. CREST is a voluntary system and holders of Shares who wish to receive and retain share certificates will be able to do so. Investors applying for Shares under the Global Offer may, however, elect to receive Shares in uncertificated form if they are a system member (as defined in The Uncertificated Securities Regulations 2001) in relation to CREST.

7. UNDERWRITING ARRANGEMENTS AND LOCK-UP ARRANGEMENTS 7.1 Pursuant to an agreement dated 25 April 2007 between, amongst others, the Company, the Directors, the Selling Shareholders and the Underwriters (the ‘‘Underwriting Agreement’’); 7.1.1 the Company and the Selling Shareholders have agreed, subject to certain conditions that are typical for an agreement of this nature, to issue and sell, as the case may be, the New Shares and the Existing Shares to be issued and sold under the Global Offer at the Offer Price; 7.1.2 the Underwriters have agreed, subject to certain conditions that are typical for an agreement of this nature, including Admission, to procure subscribers and purchasers for or, failing which, to subscribe for and purchase themselves the New Shares and the Existing Shares to be issued and sold under the Global Offer at the Offer Price. The Underwriting Agreement will become unconditional on Admission; 7.1.3 General Atlantic has granted an Over-allotment Option to the Stabilising Manager, pursuant to which the Stabilising Manager may, subject to certain conditions, procure purchasers for or purchase itself up to 12,628,031 Existing Shares for the purposes, amongst other things, of allowing the Stabilising Manager to meet over-allocations, if any, in connection with the Global Offer and to cover short positions resulting from stabilising transactions. The number of Existing Shares to be transferred pursuant to the Over-allotment Option, if any, will be determined not later than 30 days from the date of publication of the Offer Price. Settlement of the Over-allotment Option will take place shortly after the exercise of the Over-allotment Option; 7.1.4 the Company and the Selling Shareholders will, in aggregate, agree to pay to the Underwriters a commission of 2.25% of the amount equal to the Offer Price multiplied by the number of New Shares and Existing Shares which the Underwriters have agreed to procure purchasers or subscribers for, or failing which to purchase or subscribe for themselves, pursuant to the terms of the Underwriting Agreement (the ‘‘Gross Fixed Fee’’). This Gross Fixed Fee will be divided between the Underwriters and will include a fee of £500,000 which the Company shall pay to Citigroup in connection with its appointment as Sponsor. In addition, the Company and the Selling Shareholders will pay to the Underwriters an additional commission of between 1% (the ‘‘1% Fee’’) and 1.25% of the aggregate proceeds (including from any Existing Shares, if any, sold by the Selling Shareholders under the Over-allotment Option) of the Global Offer (the ‘‘Discretionary Fee’’). The allocation of the 1% Fee and the decision to pay any amount of the Discretionary Fee over and above the 1% Fee and its allocation among the Underwriters will in each case

59 be determined at the sole discretion of the Company within 20 days of Admission and, to the extent applicable, paid within 30 days of Admission; 7.1.5 the obligations of the Company and the Selling Shareholders to issue or sell, as the case may be, Shares and the obligations of the Underwriters to procure subscribers and/or purchasers for, or failing which to themselves subscribe for or purchase, the Shares to be issued and sold under the Global Offer are subject to certain conditions including, among others, Admission occurring by not later than 8.00 a.m. on 30 April 2007 or such later time and/or date (being not later than 18 May 2007) as the Joint Global Co-ordinators may agree with the Company. The Joint Global Co-ordinators may terminate the Underwriting Agreement in certain circumstances that are typical for an agreement of this nature prior to Admission. These circumstances include the occurrence of certain significant changes in the condition (financial or otherwise), prospects or earnings of the Company or any other member of the Group and certain changes in financial, political or economic conditions; 7.1.6 the Company and the Selling Shareholders have severally agreed to pay any stamp duty or stamp duty reserve tax arising on the issue or initial sale (as applicable) of Shares by them under the Global Offer (including in the case of the Selling Shareholders pursuant to the Over-allotment Option); 7.1.7 the Company has agreed to pay or cause to be paid (together with any related value added tax) certain costs, charges, fees and expenses of, or in connection with, or incidental to, amongst others, the Global Offer, Admission or the other arrangements contemplated by the Underwriting Agreement, including (but not limited to) its own legal fees and expenses, costs and expenses of the Registrar, other advisers’ fees and expenses and certain expenses of the Underwriters (including the fees and expenses of their legal advisers); and 7.1.8 the Company has given certain representations, warranties and undertakings to the Underwriters. The Company has agreed to indemnify the Underwriters in respect of losses suffered or incurred in connection with the Global Offer. The liabilities of the Company under the Underwriting Agreement are not limited as to time and amount. The Directors have given certain representations, warranties and undertakings to the Underwriters. The liabilities of the Directors under the Underwriting Agreement are limited as to time and amount. The Selling Shareholders have given certain representations, warranties and undertakings to the Underwriters. The liabilities of the Selling Shareholders under the Underwriting Agreement are also limited as to time and amount.

7.2 Description of Lock-Up Arrangements 7.2.1 The Company has undertaken in the Underwriting Agreement that during a period of 180 days from the date of Admission it will not, without the prior written consent of the Joint Global Co-ordinators (not to be unreasonably withheld), offer, sell or contract to sell, pledge or otherwise dispose of, directly or indirectly, or announce an offering or issue of, any Shares (or any interest therein or in respect thereof) or any other securities exchangeable for or convertible into, or substantially similar to, Shares or enter into any transaction with the same economic effect as, or agree to do, any of the foregoing. These restrictions are, however, subject to certain specified exceptions (which for the avoidance of doubt do not require prior written consent of the Joint Global Co-ordinators) including: (a) the issue of any Shares to the Xchanging Employee Benefit Trust or the Xchanging B.V. 2007 Employee Benefit Trust; and (b) the issue of any Shares arising from the exercise of any share options under one of the Company’s share option schemes or the grant by the Company of such options. 7.2.2 Each of General Atlantic, Sal. Oppenheim, 52nd Street Associates, the Directors and certain of the Senior Managers have undertaken in the Underwriting Agreement or in separate lock-up agreements that, in the case of General Atlantic, Sal. Oppenheim and 52nd Street Associates during a period of 180 days from the date of Admission and, in the case of the Directors and the relevant Senior Managers during a period of 365 days from the date of Admission, it or he or she will not, without the prior written consent of the Joint Global Co-ordinators, directly or indirectly, offer, issue, lend, sell or contract to sell, issue options in respect of, or otherwise dispose of, directly or indirectly, or announce an offering or issue of,

60 any Shares (or any interest therein or in respect thereof) or any other securities exchangeable for or convertible into, or substantially similar to, Shares or enter into any transaction with the same economic effect as, or agree to do, any of the foregoing. These restrictions are, however, subject to certain specified exceptions (which for the avoidance of doubt do not require prior written consent of the Joint Global Co-ordinators) including: (a) a disposal of Shares made in connection with a general offer for the ordinary share capital of the Company, made in accordance with the Takeover Code; (b) a disposal of Shares in connection with, or pursuant to, any scheme of reconstruction under section 110 of the Insolvency Act 1986; (c) a disposal by any of General Atlantic, Sal. Oppenheim or 52nd Street Associates to another company within its group or, in the case of General Atlantic only, between its funds (provided that any such transferee shall have entered into an agreement with the Joint Global Co-ordinators in which it undertakes to be bound by the lock-up arrangements); (d) in respect of General Atlantic only, a disposal of not more than 1,200,000 Shares in aggregate in the Company, in the form of a bona fide gift or charitable contribution; (e) a disposal of Shares executed in accordance with the terms of the underwriting or stock lending agreements; (f) any disposal solely in order to raise funds in order to meet liabilities to which such party is subject pursuant to the terms of the Underwriting Agreement; (g) any disposals required by the Directors or Senior Managers to meet tax obligations (and, in the case of Mike Margetts, Nigel Rich and Stephanus Brenninkmeijer, to pay the exercise price) that have arisen as a result of the exercise of their options in the Company or any Subsidiary or have otherwise arisen as a result of listing the Company; (h) in respect of David Andrews only, a disposal or transfer in the form of a bona fide gift or charitable contribution, with the relevant transferee entering into a deed of adherence to the terms of the lock-up; and (i) in respect of David Andrews only, disposals or transfers of not more than an aggregate of 1,000,000 Shares to enable gifts to be made to employees of the Group and to cover the costs of any applicable tax arising in connection therewith. 7.2.3 For the avoidance of doubt, the carve outs in paragraphs (c) and (d) shall not apply to the Directors and the relevant Senior Managers. 7.2.4 If the Joint Global Co-ordinators grant their specific consent (as contemplated by paragraph 7.2.2 above) to permit any Selling Shareholder to dispose of any of his/her/its Shares, then each of 52nd Street Associates and Sal. Oppenheim shall also be entitled to dispose of all of its shareholding in the Company at that time.

7.3 Description of Stock Lending Arrangements In connection with settlement and stabilisation, the Stabilising Manager has entered into a stock lending agreement with General Atlantic Partners (Bermuda), L.P. Pursuant to this agreement, the Stabilising Manager is able to borrow up to 12,628,031 Shares. This agreement will allow the Stabilising Manager to settle, on Admission, over-allotments, if any, made in connection with the Global Offer. If the Stabilising Manager borrows any Shares pursuant to the stock lending agreement, it will be required to return equivalent securities to the lender by no later than 25 May 2007 in accordance with the terms of the stock lending agreement.

61 PART 4: OPERATING AND FINANCIAL REVIEW The following is a discussion of the Group’s results of operations and financial condition for the 2004 financial year, the 2005 financial year and the 2006 financial year. Prospective investors should read the following discussion, together with the whole of this document, including Risk Factors, the Group’s historical consolidated financial statements and the related notes included in Part 5: Accountants’ Reports and Financial Information and Part 6: Unaudited Pro Forma Financial Information and should not just rely on the key or summarised information contained in this Part 4: Operating and Financial Review. The Group’s historical consolidated financial statements have been stated in IFRS, which differs from US GAAP in a number of significant respects. The Company has not quantified the impact of those differences. Prospective investors should consult their own professional advisors for an understanding of the differences between IFRS and US GAAP. The financial information in this Part 4: Operating and Financial Review has been extracted without material adjustment from Part 5: Accountants’ Reports and Financial Information and Part 6: Unaudited Pro Forma Financial Information. This section contains ‘‘forward looking statements’’. Those statements are subject to risks, uncertainties and other factors that could cause the Group’s future results of operations or cash flows to differ materially from the results of operations or cash flows expressed or implied in such forward looking statements. Percentages in tables have been rounded and accordingly may not add up to 100%. In addition, certain financial data has been rounded. As a result of this rounding, the totals of data presented in this document may vary slightly from the actual arithmetic totals of such data.

1. OVERVIEW The Group is one of the leading international, pure play business process outsourcing (‘‘BPO’’) providers. It has more than 3,800 employees operating in seven countries and services blue-chip customers in 34 countries, with a focus on the United Kingdom and Continental Europe. The Group provides industry specific processing and other services to the banking and insurance industries and also provides procurement, finance and accounting and human resources services to customers across industries. The Group’s customers include Aon, BAE Systems, Boots the Chemists, Citibank, Deutsche Bank, the IUA, Lloyd’s, National Australia Group, Sal. Oppenheim, United Biscuits and University Hospital Birmingham. The Group performs complex, large-scale processing on behalf of its customers, providing them with better service at a lower cost than when these functions were performed internally. Operating customers’ non-core functions is the Group’s core business. Examples of the Group’s current services in 2006 included: settling an estimated 15% of securities transactions in the German market, settling £11.4 billion of insurance claims in the Lloyds insurance market, providing human resource and payroll services to 1.5 million staff and their dependants, and procuring £390 million of indirect spend and paying over £800 million of invoices. The Group offers a full suite of BPO services including large-scale partnering, outsourcing, software products and solutions, Straight Through Processing (‘‘STP’’) and business support. At the heart of the Group’ s business strategy is a unique partnering approach. The Group takes over a customer’s back office and creates a jointly owned business with its customer called an ‘‘Enterprise Partnership ’’ or ‘‘EP’’. Enterprise Partnerships provide the Group with scalable platforms from which it can also offer its services to other customers. A key component of the Group’s approach to large partnering and procurement outsourcing arrangements is its gain-share approach. The gain-sharing approach is a step beyond that of a traditional outsourcing arrangement where a customer outsources services in return for payment of an agreed fee. The nature of the gain-sharing relationship provides transparency for all parties, shortens decision-making time and engenders an environment of trust. The Group uses a distinctive execution approach to deliver its services in a standardised and repeatable way. The Group delivers its services through a balance of on-shore and off-shore operations, seeking to provide the lowest cost solution consistent with its customers’ requirements.

62 The Group recorded revenues of £393.5 million for the year ended 31 December 2006, an increase from £350.0 million in 2005 and £254.1 million in 2004 (a 2004-2006 CAGR of 24%).

2. PRESENTATION OF FINANCIAL RESULTS Consolidation The EPs are generally formed on the basis of 50% ownership by the Group and 50% ownership by the partner, but with the Group retaining operational control over the EP. As a result, the Group fully consolidates the results of its EPs in its financial statements, which thus contain significant minority interests. As a result, the Group measures financial performance based on the Group’s share of profit, which it believes offers an important measure of performance for its shareholders. For a discussion and analysis of the measures the Group uses to monitor performance, see paragraph 5 of this Part 4: Operating and Financial Review.

Revenue Recognition Included in the revenue recognition policy is the treatment of revenue generated from procurement contracts. Where the Group acts as principal, the revenue that is recognised includes the cost of the goods or services acquired for the customer. Where the Group acts as agent, only the fee for arranging the purchase is recognised as revenue. For further discussion of the Group’s revenue recognition policies for the various services and products it provides, see Note 2(e) in Section A of Part 5: Accountants’ Reports and Financial Information.

Segments The Group has three operating segments: Insurance, Financial Markets and Business Lines. In both of the Insurance and Financial Markets segments the Group provides industry-specific BPO services and software to customers. Business Lines is a cross-industry segment in which the Group provides procurement, human resources, finance and accounting and IT hosting services. These services are also provided to the other segments in the Group to extract scale benefits and ensure consistency of approach. These three operating segments are supported by the Group’s offshore business processing services facility (‘‘BPS’’) and ‘‘Corporate’’, which provides the infrastructure, resources, and investment to sustain and grow the business, including sales and commercial, performance management, implementation and business management functions. Although the Group’s financial statements also include a breakdown of revenue by geography, the Group uses these four segments to manage its business.

Key Performance Indicators Due to the significant minority interests in the Group, the Group measures financial performance based on the Group’s share of profit which it believes offers an important measure of performance for the Group’s shareholders. Further, the Group monitors financial performance pre-exceptional items and after adding back certain non-cash items comprising share based payment charges, amortisation of intangible assets that were previously unrecognised by an entity acquired by the Group, imputed interest on the historic financing structure of the Group which will fall away on Admission, imputed interest on put options and the related tax thereon. For further discussion and analysis of the measures the Group uses to monitor performance, see paragraph 5 of this Part 4: Operating and Financial Review.

3. FACTORS AFFECTING RESULTS OF OPERATIONS The following is a discussion of the most significant factors that have affected the Group’s results of operations in the past and that are expected to continue to affect the Group’s business.

Revenue The Group’s revenues have been significantly affected by (i) the pricing structures used in connection with each of the Group’s five offerings, (ii) the volumes of transactions achieved, (iii) the ability of the Group to attract new customers – both to develop new EPs and platforms and also to leverage existing platforms, (iv) the basis on which procurement spend is managed in the Group’s procurement-related

63 BPO arrangements, (v) the level of discounting negotiated into major arrangements and (vi) the impact of acquisitions.

Pricing Structure The pricing structure for each of the Group’s five offerings has a significant impact on Group revenue. Partnering—Partnering has been a key contributor to the revenue of the Group, and provides a platform for further growth through the other offerings. The EP permits customers to share the profit and capital upside created by the productivity and efficiency gains achieved through application of the Group’s execution approach. Partnering is used for large and complex business processes. The Group creates a company jointly owned with the customer (its partner) that it calls an Enterprise Partnership. The resources and assets from the customer’s organisation are transferred into the EP in order to create a service platform. The Group has day-to-day operational and boardroom control of the EP and the partner has representation on the EP Board. During the period in which the EP is being created, the Group undertakes a detailed exercise to establish a ‘‘baseline’’ of the cost of the services to be provided by the EP (using the customer’s cost data), such that the EP is initially in a profit-neutral position (i.e. the price paid by the customer for the services under the service agreement is equal to the costs being incurred by the EP). Where appropriate, the terms of the EP contracts will provide for adjustment of the ‘‘baseline’’ costs six months after the start of the contract. The Group may commit to provide a minimum level of cost savings to the customer as part of the EP services agreement. These minimum cost savings form part of the customer’s profit share. These minimum cost savings are delivered through two principal mechanisms, depending on the nature of the EP: price discounts for services performed (for example, an agreement to provide securities processing at a decreasing base price over the period of the service contract) and rebates (for example, an agreement to provide guaranteed rebates to customers either by way of a fixed amount or a fixed percentage of revenue, which can increase over the period of the service contract). Both of these mechanisms result in a reduction of income for the EP, which places a greater incentive on the Group to reduce the cost base and/or supplement the EP with additional third party revenue in order to maintain profitability. The charges for the services provided under the service agreement are paid by the customer to the EP, generally under a fixed price arrangement. For procurement arrangements, the customer may also pay an agreed administration fee to the EP. Over time fixed service fee arrangements agreed at the establishment of an EP typically evolve into full or partial transactional pricing arrangements. While transactional pricing exposes the EP to fluctuations in volumes, the EP’s position is protected through its exclusivity arrangements with the partner. Furthermore, being able to offer transactional pricing of an EP’s services facilitates opportunities for sales of individual services to existing or new customers from the platform. Revenue from EPs is therefore affected by a variety of factors, including a determination of the baseline costs which provide the basis for the EP’s service fees; the levels of service charge discounts from the baseline over the course of the contract (if any); the volume of transactions or services required by the customer over the course of the service contract; whether or not the customer requires modifications of services; proper and timely implementation of contracts; customer’s exercise of termination rights; changes of control, mergers or consolidations affecting customers; and provisions for price indexation. Outsourcing—The Group also undertakes major, complex outsourcing arrangements without an Enterprise Partnership structure. As with EPs, the principle behind the Group’s Outsourcing Offering is to reduce customers’ processing and procurement costs. Outsourcing involves the transfer of a business process or procurement spend from the customer’s organisation on to one of the Group’s existing platforms. The Group provides Outsourcing customers with services based on an agreed specification and usage charge and, for procurement expenditure, a ‘‘baseline’’ cost of items is also established.

64 The establishment of baseline costs and commitment to a savings profile are common to both Partnering and procurement Outsourcing arrangements. In respect to procurement Outsourcing contracts, there is a gain-sharing approach, in which the savings against the baseline costs are allocated on a contractually agreed basis (as opposed to sharing the profit of a partnership). In respect of Outsourcing contracts for non-procurement BPO services, the customer benefits from contracted discounts rather than profit sharing. Revenue from Outsourcing contracts may be affected by similar factors to those outlined in the partnering section above. Products—The Group’s Products consist of a range of business processing software products which provide customers with solutions that the Group believes are more efficient than the customer could develop internally. The Products can be tailored to the customer’s specific needs and support for the Products is also provided. As the Group develops standardised Products, these are licenced to its customers. The Group charges licence fees, implementation fees and ongoing support and maintenance fees for the use of its Products. Where the Group performs specific enhancements for customers, such costs are recovered through the price charged. Non-software based Products are generally charged on a price per unit of service basis. Straight Through Processing—STP refers to additional services offered by the Group that lie outside of the scope of the original Outsourcing or EP contract. STP is a key characteristic of the Group’s business model in that it generates additional value by extending the scope and nature of the services provided to encompass more of the customer’s business. STP services are initially priced at cost (including allocated overhead) plus an agreed mark-up, which then becomes the agreed service price. Any implementation costs to the Group are recovered as part of the service charge. STP services tend to be recurring and utilise the scalability of the Group’s platforms, providing the Group with incremental revenues from existing customers. Business Support—The Group’s Business Support service is typically structured as a contractual relationship between the Group and its customers for a professional service or services using the Group’s employees. The Group offers experts on a project-by-project or interim assignment basis to support improvement activities in customers’ processing activities. Generally, this encompasses smaller-scale functions that are put in place within (or without altering) the customers’ existing operations. Customers are charged for Business Support services based on the time and materials required or at a price per transaction. Prices are determined taking into account the level of expertise of staff, degree of involvement and the achievement of the agreed key deliverables.

Volumes Achieved The amount of revenue generated by most of the Group’s major arrangements is often affected by the volume of transactions or services that are undertaken or provided pursuant to the service contract. The amount of revenue affected by volume generally increases over time as fixed service fee arrangements agreed at the establishment of an EP transition to transactional price for service arrangements during the life of the contract. The effects volume can have on the results of operations for the Group’s major arrangements are described below: In contracts without transactional pricing, volume can vary within agreed bands without any adjustment to price. If the level of activity falls outside of agreed bands, the pricing will be adjusted by the change in actual cost. In the case of contracts with transactional pricing Group revenue will vary according to transaction volume. In these circumstances, the Group seeks to secure certain levels or types of fees that are not linked to volume. These could take the form of a subscription fee, or in the case of a procurement contract, contractually agreed levels of savings or gain-sharing would fall away if volume levels failed to reach specified minimum levels.

Developing New Customers Developing new customers has a significant impact on revenue in two ways. First, the Group’s focus on major, complex BPO arrangements means that developing a new EP or other Outsourcing arrangement potentially adds a large increment to revenues. Second, in order for the Group to take

65 full advantage of the scalability of the platforms it has developed for its existing EPs and major Outsourcing arrangements, it needs to be able to leverage them by finding new customers to whom services can be provided with relatively little alteration of existing services.

Acting as principal in procurement contracts The Group’s procurement-related Outsourcing arrangements have an effect on revenues (and cost of sales). Where the Group acts as principal, rather than as agent, the revenue recognised by the Group includes the value of the goods and services acquired on the customers’ behalf (and the corresponding cost is included as a cost of sales). Procurement contracts in which the Group acts as principal therefore significantly raise the level of both revenue and cost of sales of the Group, as compared to the impact of procurement done on an agency basis, in which the customer pays the cost to the supplier and the Group simply recognises its share of the benefits.

Discounting The Group’s EPs and other major Outsourcing arrangements typically feature discounts built in to the service contracts. These are commercially negotiated contract conditions which vary with each major contract. Discounts are generally based on a scale, with discounts increasing over time until the maximum discount is reached. The Group’s annual revenue is affected by the level of contracted discounts in new EPs and Outsourcing contracts and annual increases in discounts with existing customers where a scale of increasing discounts forms part of the contract. Revenue is recognised and reported net of contracted discounts. Where EP contracts include guaranteed discounts to partners, the Group is entitled to profits equivalent to the value of the guaranteed discount, after which the remaining profits are distributed in line with the respective shareholdings.

Acquisitions Strategic and selective acquisitions have been a factor in increasing the revenue of the Group. During the three-year period ended 31 December 2006, the Group made three strategic acquisitions (RebusIS, Landmark and Ferguson Snell). The Group will continue to consider selective acquisitions in areas in which the Group may require additional expertise, or where such acquisitions would enhance the scale of existing operations (either vertically, geographically or in terms of technological capability) in a manner consistent with the core practices of the Group.

Costs The Group’s costs are essentially divided into two principal categories: cost of sales and administrative expenses.

Cost of Sales Cost of sales are primarily costs attributable to the operations of the subsidiaries and EPs of the Group that provide services to customers. Cost of sales is principally composed of direct staff costs, costs of goods and services directly related to sales, technology and communications costs, other staff-related costs, property-related costs (primarily leasing costs) and depreciation and amortisation. ‘‘Costs of goods and services directly related to sales’’ is comprised predominantly of the costs of sales related to procurement activities in which the Group acts in the capacity of principal, as described in the paragraph headed ‘‘Acting as principal in procurement contracts’’ of this Part 4: Operating and Financial Review. To the extent that the Group enters into procurement contracts where it acts as principal, the cost of goods and services directly related to these procurement activities will affect cost of sales. The Group seeks to decrease costs of sales as a percentage of revenues through productivity improvements including the process optimisation, arbitrage and aggregation activities described under paragraph 9 of Part 1: Information on the Group.

Administrative Expenses The Group’s administrative expenses represent central costs required to provide the infrastructure, resources, and investment to sustain and grow the business, including sales and commercial

66 performance management, implementation and business management functions. Additionally, administrative expenses include depreciation and amortisation of pre-contract costs and capitalised assets created from the implementation of existing EPs. Certain of the Group’s expenses incurred centrally (such as time of senior management who are employed by Corporate but who work for an individual operation) are recharged to the customer-facing unit. Recharges are not recognised by the Group as revenue but rather reduce administrative expenses, which are shown on a net basis. Administrative costs affect the results of operations primarily through: Economies of scale. As Group revenue increases, administrative expenses are expected to reduce as a proportion of total revenue thereby improving the results of the business. Utilisation. Increasing utilisation of central implementation resources and leveraging reusable assets positively affects the results of the business. Maintaining or increasing utilisation of these resources is dependent upon increasing the scope and scale of the Group’s business generally (and in particular on successfully establishing new EPs and major Outsourcing arrangements). Capitalisation of implementation investment in EPs. When a new EP is formed, the Group invests in the transformation of the EP from a back office to a commercial business (implementation investment). During implementation, where the investment can properly be considered to create a reusable asset, the cost is capitalised, otherwise it is expensed as incurred. Results will be affected by the amount of implementation activity undertaken during the year and the associated value and number of assets created.

Finance Costs Finance costs primarily represent interest earned on the Group’s cash resources and the expected return on the Group’s defined benefit pension scheme assets. These are offset by actual and imputed interest on debt and deferred consideration and interest on pension scheme liabilities.

Taxation The Group operates in a number of different tax regimes and hence the effective tax rate is driven by the proportion of profits earned in the different jurisdictions. The main two countries where profits arise are the United Kingdom, which has a statutory tax rate of 30%, and Germany, which currently has a tax rate of 40.86% but which is due to decrease in January 2008 to 32.86%. The Group holds tax losses in its UK central services unit totalling £16.2 million at 31 December 2006. These tax losses were built up in the early years of the business, as the Group incurred investments in building the platforms that have become the basis of the Group’s EPs and major Outsourcing arrangements. The Group’s effective tax rate can be reduced over the period that these tax losses are utilised.

Profit Attributable to Equity Holders of the Group The factors discussed in the revenue and costs sections above all affect the Group’s profitability. In addition, there are a number of factors that affect the profit attributable to equity holders of the Group. The EP structure is the key factor contributing to the profit attributable to equity holders of the Group. Although an EP’s equity ownership is generally divided on a 50/50 basis with the partner, the Group anticipates that over time it will usually derive returns in excess of 50% of the EP’s profitability. Within the contracting mechanism, the Group charges performance and licence fees to the EP in exchange for access to the software, methodologies, and reusable assets provided by the Group. These fees are extracted prior to determination of the EP’s profitability. Also, where EP contracts include guaranteed discounts to partners, the Group is entitled to profits equivalent to the value of the guaranteed discount, after which the remaining profits are distributed in line with the shareholders’ respective economic rights. Buy-out of minorities will not affect Group operating profit as the EPs are fully consolidated into the results of the Group. Buy out of minorities will affect profit attributable to equity holders of the

67 Group as it will reduce the amount of minority share of profits to be paid out by the Group. The Group recently bought BAE Systems’ 50% interests in XHRS and XPS with effect from 1 January 2007.

Seasonality

The Group’s profit performance is higher in the second half of the year. In the first half of the year performance is impacted by guaranteed discounts to EPs which increase in January each year until they reach the maximum contracted discount level. The Group’s profitability typically grows during the year as productivity improvements reduce costs and new business is contracted.

Other Factors The Group operates in a number of territories, with operations in the UK, Western Europe, the United States, India, and Australia. The Group’s results are affected by movements in exchange rates between currencies in these regions. The greatest exposure is to movements in the Euro against the pound sterling from the Group’s Financial Markets business based in Germany.

4. RESULTS OF OPERATIONS The following table sets forth the consolidated income statement data for the Group for the years indicated.

Year ended 31 December 2004 2005 2006 £ (in millions) Revenue...... 254.1 350.0 393.5 Cost of sales ...... (222.8) (302.6) (348.7) Gross profit...... 31.3 47.4 44.8 Administrative expenses — pre-exceptional items...... (12.8) (13.2) (13.7) Administrative expenses — exceptional items...... (6.9) — (6.9) Administrative expenses...... (19.7) (13.2) (20.6) Other operating income — exceptional profit on disposal of Group companies ...... 4.7 — — Operating profit...... 16.3 34.2 24.2 Finance costs...... (6.8) (8.4) (8.4) Finance income...... 6.6 8.1 9.1 Profit before taxation...... 16.1 33.9 24.9 Taxation...... (5.7) (11.3) (7.5) Profit for the year ...... 10.4 22.6 17.4 Profit attributable to minority interests...... 5.4 10.8 6.7 Profit attributable to equity holders of the Group...... 5.0 11.8 10.7 10.4 22.6 17.4

68 The following table presents an analysis of revenues by the three financial reporting segments: Insurance, Business Lines and Financial Markets.

2004 2005 2006 (£ in % of (£ in % of (£ in % of millions) revenue millions) revenue millions) revenue Revenue Insurance...... 109.7 43 116.9 33 135.7 34 Business Lines ...... 83.7 33 143.9 41 176.1 45 Financial Markets ...... 62.9 25 96.8 28 96.2 24 Inter segment revenue...... (2.2) (1) (7.6) (2) (14.4) (4) Total Revenue ...... 254.1 100 350.0 100 393.5 100

Revenue Revenue for the year ended 31 December 2006 was £393.5 million as compared to £350.0 million for the year ended 31 December 2005, an increase of £43.5 million, or 12.4%. This increase is attributable to organic growth in the Insurance and Business Lines sectors, including the creation of a new insurance EP with Aon and entry into four new Outsourcing contracts. Revenue also grew during the year due to annual indexation, and increased volumes in existing businesses, primarily in Business Lines where several large projects increased demand for technical contract labour procurement from BAE Systems and in Insurance where claims in respect of recent catastrophes (such as Hurricane Katrina) continued to generate increased claims volumes. Increases in Business Lines revenue were partially offset by transition of the BAE Systems procurement contract to a 50/50 gain-share model, introducing rebates which were netted against revenue. Revenue for the year also benefited to a small extent from the acquisition of Landmark and Ferguson Snell by the Insurance and Business Lines sectors respectively. Financial Markets revenue decreased marginally in 2006 as increased contract discounts and a reduction in the quantum of the base revenue services charge were largely offset by increased revenue from new services to Deutsche Bank and other third-party revenue. Financial Markets revenue was further reduced through the anticipated exit of State Street Bank, who acquired Deutsche Bank’s custody business prior to the establishment of the Xtb EP. As a result of the above, the Business Lines segment contributed 45% of Group revenue in 2006, compared to 41% in 2005, Financial Markets contributed 24% in 2006, compared to 28% in 2005 and Insurance contributed 34% in 2006, compared to 33% in 2005. Revenue increased £95.9 million, or 37.7% in the year ended 31 December 2005 to £350.0 million from £254.1 million in the year ended 31 December 2004. £35.5 million of this increase resulted from inclusion of a full year’s results of the Xtb EP entered into with Deutsche Bank in June 2004. Further, revenue was enhanced by expansion of the procurement contract between XPS and BAE Systems to include the ‘‘technical contract labour’’ category, which generated £51.2 million of revenue in 2005 recognised on a principal basis. Revenue for the year also benefited from continued organic growth across the existing businesses. All three operating segments increased revenue between 2004 and 2005, however, the proportion of revenue contributed increased significantly in Business Lines, primarily due to the new technical contract labour spend category procured on behalf of BAE Systems being accounted for on a principal rather than agent basis. This had a dilutive effect on the Business Lines segment adjusted margins. The Business Lines segment contributed 41% of Group revenue in 2005, compared to 33% in 2004, Financial Markets contributed 28% in 2005, compared to 25% in 2004 and Insurance contributed 33% in 2005, compared to 43% in 2004.

Cost of sales Cost of sales for the year ended 31 December 2006 was £348.7 million as compared to £302.6 million for the year ended 31 December 2005, an increase of £46.1 million, or 15.2%. Cost of sales has increased largely as a result of the sales growth achieved during the period. In particular, cost of goods and services directly related to sales increased due to increased volume of principal procurement spend, primarily BAE Systems technical contract labour category. Direct staff costs also increased during the year, primarily due to the transfer of approximately 500 staff from Aon in September upon commencement of the new EP with Aon. Additionally, cost of sales increased during the year ended

69 31 December 2006 due to additional costs incurred to strengthen the Group’s IT infrastructure and to further the development of scalable business processing in India. Cost increases were offset to a small extent by the release of unutilised provisions. Cost of sales for the year ended 31 December 2005 increased £79.7 million, or 35.8% from £222.9 million for the year ended 31 December 2004. Cost of sales increased largely as a result of the continued growth of the business, in particular the full year impact of Xtb which commenced trading in June 2004. Additionally, cost of sales increased due to the recognition of additional cost of goods and services associated with procurement of technical contract labour for BAE Systems, a category in which the Group acts as principal.

Administrative expenses—pre-exceptional items Administrative expenses—pre-exceptional items for the year ended 31 December 2006 were £13.7 million, an increase of £0.5 million, or 3.8% from £13.2 million in 2005. This change is attributable to the completion of a two-year investment in upgrading and building the Group’s sales teams, including the establishment of a new dedicated centralised sales hub in London and the establishment of a new business development office in Sydney, Australia. Additionally, the Group incurred implementation costs in relation to the new EP with Aon, some of which were expensed as incurred in the year. Administrative expenses—pre-exceptional items increased marginally by £0.4 million, or 3.1% in 2005 from £12.8 million in 2004. These costs have remained relatively flat despite the strong growth of the business during this period, evidencing the Group’s ability to leverage central resources across a growing business.

Administrative expenses—exceptional items The Group recorded a £6.9 million exceptional item in 2006 relating to management and legal restructuring of the Group in preparation for the Global Offer and costs incurred in migrating customers from a discontinued insurance software platform. The discontinued software was impaired in 2004 due to the RebusIS acquisition which had a superior platform that overlapped with the Group’s existing insurance underwriting product, Riskwrite. In 2004 exceptional items were recorded relating to the creation of onerous lease provisions as a result of the RebusIS acquisition (£5.4 million) and as described above, impairment charges (£1.5 million) relating to the withdrawal of support for the overlapping and therefore redundant insurance software product, Riskwrite, also resulting from the RebusIS acquisition.

Other operating income—exceptional profit on disposal of Group companies In 2004, exceptional other operating income of £4.7 million was recognised in respect of a profit on the deemed disposal of 49% of Xtb that arose as part of the transfer mechanism with Deutsche Bank, where the Group acquired a 100% share of Xtb through a holding company and subsequently sold 49% of the holding company to Deutsche Bank to create the partnership, crystalising an accounting profit on the ‘‘sale’’ transaction.

Operating profit As a result of the factors discussed above regarding revenue and expenses, operating profit for the year ended 31 December 2006 was £24.2 million as compared to £34.2 million in 2005, a decrease of £10.0 million, or 29.2%. The decrease is primarily a result of the exceptional items incurred during the year amounting to £6.9m as described above. The Group’s operating profit was also affected by the renegotiation of the procurement contract with BAE Systems, which introduced a 50/50 gain-share, in line with third-party procurement contracts, in advance of the Group’s planned acquisition of BAE Systems minority interest in this business. The Group’s operating profit was also impacted by the Group’s investments in its Indian operations, IT hosting business, strengthening of the sales and commercial functions, and implementation of the EP with Aon. These investments and implementation costs were offset by the release of unutilised provisions. Group operating profit increased to £34.2 million in 2005 from £16.3 million in 2004. In 2005, the Group’s operating profit benefited from the full year effect of the Xtb EP, which was formed in

70 June 2004. Additionally, the Group’s operating profit increased as a result of the successful completion of a number of outsourcing contracts during the year in all three operating segments. Segmental operating profit is measured by the Group pre-exceptional items and after adding back certain non-cash items. For a discussion and analysis of the Group’s adjusted segmental operating profit, see paragraph 5 of this Part 4: Operating and Financial Review.

Net finance income/(costs) Net finance income for the year ended 31 December 2006 was £0.7 million, an increase of £1.0 million from finance costs of £(0.3) million for the year ended 31 December 2005. Finance income improved due to increased bank interest earned on the Group’s cash resources of £0.3 million and the receipt of a dividend from the Group’s shareholding in CAD IT of £0.1 million. Finance costs benefited from the net impact of £0.4m from the expected return on pension scheme assets and interest costs of pension scheme liabilities. Net finance costs for the year ended 31 December 2005 remained unchanged from costs of £(0.3) million for the year ended 31 December 2004. Bank interest income increased £0.6 million, primarily due to the full year effect of interest on cash balances held by Xtb. Increased bank interest was offset by increased imputed interest charges on convertible loan notes of £(0.3) million which had increased during the year to fund the RebusIS acquisition and the Group’s expansion into Western Europe, and the net impact of £(0.3) million from the expected return on pension scheme assets and interest costs of pension scheme liabilities.

Taxation Taxation for the year ended 31 December 2006 was £7.5 million as compared to £11.3 million for the year ended 31 December 2005, a decrease of £3.8 million, or 33.7%. This decrease is attributable to lower profits of the Group and a lower tax rate applied to the Group in 2006 as a result of the utilisation of Group tax losses. The Group’s effective tax rate has decreased to 30% in 2006 from 33% in 2005. Taxation for the year ended 31 December 2005 was £11.3 million as compared to £5.7 million for the year ended 31 December 2004, an increase of £5.6 million, or 98.0%. This increase in taxation was principally due to the increase in the Group’s operating profit. The Group’s effective tax rate decreased to 33% in 2005 from 35% in 2004, primarily as a result of the utilisation of Group tax losses.

Profit for the year As a result of the foregoing, profit for the year 2006 was £17.4 million, as opposed to £22.6 million for 2005 and £10.4 million for 2004.

Profit attributable to equity holders of the Group Due to the significant minority interests in the Group, the Group believes that profit attributable to equity holders is a more useful indicator of the Group’s financial performance than profit for the year. For the year ended 31 December 2006, profit attributable to equity holders of the Group decreased by 9.5% to £10.7 million from £11.8 million for the year ended 31 December 2005. This decrease resulted from a number of exceptional costs incurred during 2006 amounting to £6.9 million. These costs related to management and legal restructuring of the Group in preparation for the Global Offer and costs incurred in migrating Insurance sector BPO customers from the Riskwrite underwriting software platform. The majority of these costs were borne by the Group’s shareholders rather than shared with the partners. For the year ended 31 December 2005, profit attributable to equity holders of the Group increased by 136% to £11.8 million from £5.0 million in 2004. This increase resulted from the performance of the business as described above and the favourable profit share from Xtb due to guaranteed discounts provided to Deutsche Bank, which reduces the partner’s share of profits. The growth in profit attributable to equity holders of the Group exceeds the growth in profit attributable to minorities in both 2005 and 2006. This growth in the share of the Group’s profits was due to the performance of 100% owned businesses, acquisitions, the effect of guaranteed discounts in EP contracts, licence fees growing with EP revenue growth, and leveraging administrative expenses.

71 The Group believes that it is important to measure financial performance based on the Group’s share of profit adjusted to take account of exceptional and certain non-cash items. For a discussion and analysis of these measures see paragraph 5 of this Part 4: Operating and Financial Review.

5. KEY PERFORMANCE INDICATORS AND ADJUSTED SEGMENTAL OPERATING PROFIT Key Performance Indicators The Group uses four key performance indicators to measure the financial performance of the business: one revenue measure, two profit measures and one cash measure. Each of these measures is discussed in more detail below.

Revenue The revenue KPI measures annual revenue from each customer relationship categorised by the remaining length of the longest contract with that customer.

Year ended 31 December 2004 2005 2006 £ (in millions) Revenue by remaining contracted customer relationship(1) Revenue...... 254.1 350.0 393.5 < 1 year...... N/A N/A 9% > 1 year and < 5 years ...... N/A N/A 24% 5 years or more ...... N/A N/A 67% The Group’s five key Offerings are contracted under a variety of contract periods. However, the business is built on platforms created by EPs, which have long term contracts (generally ten to twelve years in length) with the partner(s) thereby building long term contractual relationships with revenues across a range of Offerings.

Profit Due to the significant minority interests in the Group, the Group believes that measurement of profit attributable to equity shareholders is an important measure of performance for the Group’s shareholders. The Group uses two measures to monitor the performance of profit attributable to equity shareholders of the Group. The two measures are: Adjusted operating profit attributable to equity holders of the Group (XEBIT). Adjusted profit for the year attributable to equity holders of the Group (XPAT).

(1) There is no prior year comparative information available for the contracted customer relationship key performance indicator.

72 These profit measures are calculated by adding back the impact of exceptional items and certain non- cash items. The Group believes the resulting KPIs provide an effective measure of the underlying performance of the Group. Details of the non-cash add backs are set out below:

Adjustment Adjustment to operating to profit Item profit for the year Amortisation of intangible assets previously unrecognised by an entity acquired by the Group in a business combination, but which were recognised in accordance with IFRS 3 ...... Share based payments, representing charges to the profit and loss against share options granted to employees ...... Fair value adjustments. No fair value adjustments have arisen during the period, however these may arise if the fair value of put options held on the balance sheet is revised prior to exercise...... Imputed interest on the historic financing structure of the Group, which will fall away on Admission. As a private company, part of the Group’s historic financing has been in the form of loan notes convertible to equity, the remaining convertible loan note converts at the time of the Global Offering...... ✗ Imputed interest on put options...... ✗ Tax effect of the individual adjustments...... ✗ The XEBIT and XPAT performance are set out in the following table:

Year ended 31 December 2004 – 2006 2004 2005 2006 CAGR £ (in millions) XEBIT ...... 9.0 19.7 22.2 57% XPAT...... 6.1 13.6 17.1 67%

XEBIT XPAT

25.0 20.0 20.0 15.0 15.0 £m

£m 10.0 10.0 5.0 5.0 0.0 0.0 2004 20055APR200721535753 2006 2004 2005 5APR2007215400132006

73 XEBIT PERFORMANCE The table below details the adjustments made to operating profit to derive XEBIT.

Year ended 31 December 2004 2005 2006 (£ in millions) Operating profit ...... 16.3 34.2 24.2 Add back: —Exceptional expenses ...... 6.9 — 6.9 —Exceptional profit...... (4.7) — — Net exceptional items ...... 2.2 — 6.9 —Amortisation of intangible assets that were previously unrecognised by an entity acquired by the Group...... 0.3 0.3 0.7 —Share based payment charges ...... 0.2 0.4 0.5 Total other add backs...... 0.5 0.7 1.2 Adjusted operating profit ...... 19.0 34.9 32.3 Adjusted operating profit attributable to minority interests 10.0 15.2 10.1 XEBIT...... 9.0 19.7 22.2

XEBIT has increased 12.7% to £22.2 million in 2006 (representing a XEBIT margin of 5.6%) from £19.7 million in 2005 (representing a XEBIT margin of 5.6%). In addition to the factors impacting on operating profit, XEBIT grew due to the royalty payable from the Group’s EP with Lloyd’s and the IUA, which became effective in April 2006. Additionally, profits from acquisitions made during the period (Landmark and Ferguson Snell) contributed directly to XEBIT. The XEBIT margin of 5.6% achieved in 2006 was consistent with that achieved in 2005 despite the rebasing of the BAE Systems contract and the investment in India, sales and implementation. XEBIT increased 118.9% to £19.7 million in 2005 from £9.0 million in 2004 (representing a XEBIT margin of 3.6%). In addition to the factors impacting on operating profit, XEBIT grew due to the performance of the 100% Group owned businesses and the EP contractual arrangements some of which provided a greater profit share to the Group due to guaranteed discounts provided to partners (e.g. Xtb). The growth of XEBIT exceeded the growth of adjusted operating profit attributable to minority interests in both 2005 and 2006. This growth in XEBIT was due to the effect of licence fees growing with EP revenue, contracted licence fees becoming effective during the period, the effect of guaranteed discounts in EP contracts on profit share, performance of businesses owned 100% by the Group, acquisitions and leveraging administrative expenses.

74 XPAT PERFORMANCE

The table below details the adjustments made to profit for the year to derive XPAT.

Year ended 31 December 2004 2005 2006 (£ in millions) Profit for the year...... 10.4 22.6 17.4 Add back —Exceptional expenses ...... 6.9 — 6.9 —Exceptional profit...... (4.7) — — Net exceptional items ...... 2.2 — 6.9 —Amortisation of intangible assets that were previously unrecognised by an entity acquired by the Group...... 0.3 0.3 0.7 —Share based payment charges ...... 0.2 0.4 0.5 —Imputed interest on loan notes...... 1.2 1.4 1.1 —Imputed interest on put options...... — — 0.2 Total other add backs...... 1.7 2.1 2.5

Tax effect of add backs —Exceptional expenses ...... (1.8) — (1.3) —Exceptional profit...... — — — —Amortisation of intangible assets that were previously unrecognised by an entity acquired by the Group...... (0.1) (0.1) (0.2) —Share based payment charges ...... — — (0.6) —Imputed interest on loan notes...... (0.3) (0.2) (0.2) —Imputed interest on put options...... — — (0.1) Total tax effect of add backs...... (2.2) (0.3) (2.4) Adjusted profit after taxation ...... 12.1 24.4 24.4 Adjusted profit after taxation attributable to minority interests ...... 6.0 10.8 7.3 XPAT...... 6.1 13.6 17.1

XPAT grew by 25.7% to £17.1 million in 2006 (representing a XPAT margin of 4.4%) from £13.6 million in 2005 (representing a XPAT margin of 3.9%). As well as the performance drivers described in XEBIT above, return on cash resources improved during the period. In addition, the Group’s XPAT has benefited from a reduction in the effective tax rate from 33% in 2005 to 30% in 2006. The decrease in effective tax rate was primarily due to utilisation of Group tax losses. XPAT grew by 123% to £13.6 million in 2005 from £6.1 million in 2004 (representing a XPAT margin of 2.4%). As well as the performance drivers described in XEBIT above, finance costs attributable to equity shareholders grew during the period primarily due to the full year effect of interest on the cash balances held by Xtb. Additionally, XPAT benefited from a reduction in the effective tax rate from 35% in 2004 to 33% in 2005. The decrease in effective tax rate was primarily due to utilisation of Group tax losses.

Adjusted Segmental Operating Profit The Group has three operating segments: Insurance, Financial Markets and Business Lines. In both of the Insurance and Financial Markets segments the Group provides industry-specific BPO services and software to customers. Business Lines is a cross-industry segment in which the Group provides procurement, human resources, finance and accounting and IT hosting services. These services are also provided to the other segments in the Group to extract scale benefits and ensure consistency of approach. These three operating segments are supported by the Group’s offshore BPS and Corporate, which provides the infrastructure, resources, and investment to sustain and grow the business,

75 including sales and commercial, performance management, implementation and business management functions. Segmental operating profit is measured by the Group pre-exceptional items and after adding back certain non-cash items comprising amortisation of intangible assets that were previously unrecognised by an entity acquired by the Group and share based payment charges. The following tables present adjusted operating profit and adjusted operating profit margin by segment:

2004 2005 2006 (£ in % of (£ in % of (£ in % of millions) adjusted millions) adjusted millions) adjusted operating operating operating profit profit profit Adjusted Operating Profit Insurance...... 16.1 85 19.1 55 23.2 72 Business Lines ...... 12.3 65 17.5 50 14.2 44 Financial Markets ...... 4.1 22 13.6 39 12.5 39 BPS & Corporate...... (13.5) (71) (15.3) (44) (17.6) (55) Total Adjusted Operating Profit(1) ...... 19.0 100 34.9 100 32.3 100

2004 2005 2006 % of % of % of revenue revenue revenue Adjusted Operating Profit Margin Insurance ...... 14.7 16.3 17.1 Business Lines ...... 14.7 12.2 8.1 Financial Markets ...... 6.5 14.0 13.0 Total Adjusted Operating Profit Margin...... 7.5 10.0 8.2

Between 2005 and 2006, adjusted operating margins grew in Insurance (to 17.1% in 2006 from 16.3% in 2005) due to improved performance of the existing businesses and contribution from the acquisition of Landmark. This was offset by the establishment of a new EP with Aon during 2006, which has a dilutive effect on margin during the implementation stage. Financial Markets adjusted operating margin decreased (to 13.0% in 2006 from 14.0% in 2005) due to the impact of guaranteed discounts and the reduction of revenues from State Street offset by new third party and STP business. Adjusted operating margins in Business Lines decreased (to 8.1% in 2006 from 12.2% in 2005), primarily due to the migration of the BAE Systems procurement contract to a third party gain-share model to facilitate the buy out of the minority interests (completed with effect from 1 January 2007). Additionally, the Business Lines adjusted operating margin was negatively affected by its IT hosting operation, which invested during the year in strengthening the IT infrastructure platform to support existing and new business. BPS and Corporate increased from £(15.3) million to £(17.6) million, reflecting the investments made during the year in the sales and commercial function, India, and implementation of the new EP with Aon. Between 2004 and 2005, adjusted operating margins grew in Insurance (to 16.3% in 2005 from 14.7% in 2004) primarily due to renegotiation of the sector’s insurance claims contract and strong performance of the software business which undertook new software implementations during the year. Financial Markets adjusted operating margin also grew (to 14.0% in 2005 from 6.5% in 2004) due to the effect of productivity savings achieved during the first full year’s operations of Xtb. Adjusted operating margin in Business Lines decreased (to 12.2% in 2005 from 14.7% in 2004), due to additional principal procurement services being accounted for on a gross basis. BPS and Corporate cost increased from £(13.5) million to £(15.3) million.

(1) Adjusted operating profit is reported pre exceptional items and after certain non-cash adjustments comprising amortisation of intangible assets created on acquisition and share based payments.

76 Cash The Group uses one cash conversion measure to monitor cash performance. The Group calculates cash conversion as cash generated from operations divided by the Group’s adjusted operating profit, as detailed in the table below:

Year ended 31 December 2004 2005 2006 Cash generated from operations (£ in millions)...... 17.4 34.5 29.4 Adjusted operating profit (£ in millions)...... 19.0 34.9 32.3 Cash Conversion % ...... 91.7% 98.9% 91.1% Cash conversion was above 90% in each year during the period. The Group had strong operating cash primarily due to tight cash management and control and rigorous contracting in relation to payment terms in the EPs. Cash conversion in 2006, at 91%, was impacted by the payment of exceptional charges during the year and utilisation of provisions. If exceptional cash items were added back, cash conversion would have exceeded 100% during the year.

6. LIQUIDITY AND CAPITAL RESOURCES Historically, the Group’s sources of funding have principally been from cash flow from operations, which includes royalty and licence fees as well as dividends paid by EPs, supplemented by sales of equity and convertible debt securities. The cash reflected on the Group’s balance sheet includes cash immediately accessible for operations but also includes cash held within the Enterprise Partnerships, which is paid to the Group on an annual, or in some cases quarterly, basis as dividends and licence fees. Therefore cash available for the Group’s 100% owned operations is dependent on the periodic distributions from the Enterprise Partnerships, all of whom have a 100% distribution policy. The Group’s capital requirements have principally been for establishing EPs and other BPO operations and for selective acquisitions

77 Cash flow The following tables set forth certain information about the consolidated cash flows of the Group for the years indicated. Year ended 31 December 2004 2005 2006 (£ in millions) Cash flow from operating activities Cash generated from operations...... 17.4 34.5 29.4 Income tax paid...... (4.9) (6.4) (9.4) Net cash from operating activities ...... 12.5 28.2 20.0 Cash flows from investing activities Acquisition expenses...... (1.7) — (0.1) Acquisition costs of subsidiaries ...... (11.1) — (6.3) Cash and cash equivalents acquired with subsidiaries...... 57.1 — 0.4 Cash invested by minority interests...... — — 0.1 Purchase of property, plant and equipment...... (7.0) (5.7) (8.7) Purchase of intangible assets...... (5.8) (15.5) (7.0) Pre-contract expenditure...... (2.9) (1.0) (3.2) Proceeds from sale of property, plant and equipment ...... 0.8 1.1 0.4 Purchase of available for sale financial assets ...... — (21.8) — Interest received...... 1.8 2.4 2.8 Net cash generated by/(used in) investing activities ...... 31.3 (40.5) (21.7) Cash flows from financing activities Proceeds from issue of shares...... 0.3 10.0 1.6 Proceeds from shares not yet issued ...... — 0.8 — Purchase of own shares...... — (0.5) — Transaction costs of shares issued ...... — — (0.3) Proceeds from issue of convertible debt...... 16.0 — — Interest paid...... (0.2) (0.3) — Dividend paid to minority interests...... (7.9) (6.1) (11.6) Net cash from financing activities...... 8.2 3.9 (10.3) Effects of exchange rate changes...... 0.6 (0.2) 0.3 Net increase/(decrease) in cash and cash equivalents ...... 52.6 (8.5) (11.6) Cash and cash equivalents at 1 January ...... 26.3 78.9 70.3 Cash and cash equivalents at 31 December ...... 78.9 70.3 58.7

Net cash from operating activities In 2006, cash flow from operating activities exceeded operating profit by £5.3 million. Non-cash items of £13.6 million, comprising primarily depreciation and amortisation, were offset by £8.4 million absorption of working capital primarily as a result of utilisation of prior year provisions by Xtb, which held a number of cash backed provisions acquired when the EP was established. In 2005, cash flow from operating activities exceeded operating profit by £0.3 million. Non-cash items of £10.3 million, comprising primarily depreciation and amortisation, were offset by £10.0 million absorption of working capital. Trade and other receivable balances increased during the year primarily as a result of an increase in procurement business transacted as principal, and amounts due at year end from Deutsche Bank to settle outstanding transfer arrangements in relation to Xtb. In 2004, cash flow from operating activities exceeded operating profit by £1.1 million. Non-cash items of £6.0 million, comprising primarily depreciation and amortisation, were offset by a non-cash profit of £4.7 million recognised on the creation of the Xtb EP. Working capital decreased during the year by £4.9 million primarily as a result of the utilisation of provisions in Xtb, acquired when the EP was established.

78 Net cash generated by/(used in) investing activities In 2006, cash utilised in investing activities totalled £(21.7) million. During the year, the Group acquired two business services companies, Landmark and Ferguson Snell. In addition, the Group continued to invest in developing new business, capitalising £3.2 million in pre-contract expenditure in relation to negotiating the new EP with Aon and a number of material outsourcing contracts such as the procurement contracts with National Australia Group and BAE Systems Australia, and the HR administration contract with University Hospital Birmingham. The Group continued to invest in developing intangible assets, both centrally in relation to investment commitments made to partners and within the operating businesses developing and maintaining operating infrastructure. Finally, the Group invested in tangible assets, which, in addition to the purchase of assets in the normal course of business, comprised of fit out and hardware assets in relation to a new data centre management contract. In 2005, cash utilised in investing activities totalled £(40.5) million (£(18.7) million before investments in financial assets). Investments in intangible assets included continued implementation investment in the Xtb EP and e-processing infrastructure assets in the Insurance sector. During the year, the Group invested in financial assets available for sale comprising a strategic investment in CAD IT and listed debt securities purchased by Xtb. The Group continued to invest in developing new business, capitalising £1.0 million in pre-contract expenditure. In 2004, cash generated by investing activities totalled £31.3 million. This included cash and cash equivalents acquired with the Xtb EP totalling £57.1 million, which commenced on 1 June 2004. Excluding this, cash utilised in investing activities amounted to £(25.8) million. A significant element of this was the Group’s investment during the year in the acquisition of RebusIS. Additionally, the Group invested in tangible assets acquired in the normal course of business and intangible assets created during the implementation of EP’s, primarily Xtb, and investment by existing EPs in intangible assets.

Net cash from financing activities In 2006, cash from financing activities totalled £(10.3) million, primarily comprising dividends paid to minority interests totalling £(11.6) million during the year in respect to partners’ share in EP profits. This was partially offset by proceeds from the exercising of options during the year totalling £1.6 million. In 2005, cash from financing activities totalled £3.9 million, primarily comprising £10 million received from the subscription of a new class of preference D shares in the Group by Sal. Oppenheim. Dividends were paid during the year to minority interests totalling £(6.1) million in respect to partners’ share in EP profits. In 2004, cash from financing activities totalled £8.2 million primarily comprising proceeds from the issue of convertible loan notes to the Group’s Major Shareholder, General Atlantic, totalling £16.0 million, which were issued to fund the Group’s acquisition of RebusIS and its expansion into Western Europe. This was offset by dividends paid to minority interests totalling £(7.9) million during the year in respect to partners’ share in EP profits.

79 Capitalisation and indebtedness of the Xchanging B.V. Group The following tables show the capitalisation of the Xchanging B.V. Group as at 31 December 2006 and its gross indebtedness as at 28 February 2007.

Gross indebtedness

28 February 2007 (£ in millions) Total current debt Secured(1) ...... 13.2 Unsecured/non-guaranteed(2) ...... 0.5 Guaranteed(3)...... 49.9 63.6 Total non-current debt Secured...... — Unsecured/non-guaranteed — Guaranteed(4)...... 7.2 7.2

Capitalisation

31 December 2006 (£ in millions) Shareholders’ equity(5) ...... Ordinary shares...... 0.2 Share premium...... 82.6 Other reserves...... 1.3 Total capital and reserves...... 84.1

There has been no material change to the capitalisation of Xchanging B.V. since 31 December 2006.

(1) Secured current debt comprises a sterling convertible loan note of £13,184,000 which can be converted into convertible preference class C shares and is secured over such shares. This will be converted into equity prior to Admission. There is also £5,000 in respect of hire purchase obligations, which is secured against those assets to which the obligations relate. (2) Unsecured/non-guaranteed current debt relates to bonds issued on the acquisition of Landmark in 2006. (3) Guaranteed current debt is the deferred consideration of £47,114,000 payable by a member of the Group in relation to the acquisition of the minority interests in Xchanging Procurement Services in 2007 and contingent deferred consideration of £2,784,000 for the acquisition of Ferguson Snell in 2006, both of which are guaranteed by Xchanging B.V. should the contracted acquiring entity be unable to meet its obligations. (4) The Group has minority shareholders in two Enterprise Partnerships that hold the right to sell their shares to the Group at a future date, with guarantees provided by Xchanging B.V. should the potential acquiring entity be unable to meet its obligations. (5) Shareholders’ equity does not include the profit and loss account reserve.

80 Net Indebtedness The following table shows the net financial indebtedness of the Xchanging B.V. Group as at 28 February 2007. 28 February 2007 (£ in millions) Cash...... 54.4 Cash equivalents ...... — Trading securities...... — Total liquidity...... 54.4 Current financial debt...... (63.6) Current portion of non-current debt ...... — Current financial debt ...... (63.6) Net current financial indebtedness...... (9.2) Non current bank debt ...... — Bonds issued...... — Other non-current financial debt ...... (7.2) Non-current financial indebtedness...... (7.2) Net financial indebtedness ...... (16.4)

Debt Facility The Group entered into a credit agreement in March 2007 with Lloyds TSB Bank plc, providing a maximum aggregate principal amount of £35 million, consisting of a £25 million multi-currency term loan facility and a £10 million multi-currency revolving credit facility. For more information, please see paragraph 18 of Part 8: Additional Information.

Capitalisation and indebtedness of Xchanging plc The Company’s capitalisation as at 31 December 2006 was £50,000. The Company had no indebtedness as at 28 February 2007.

Contractual Commitments The following table presents the Group’s contractual obligations as at 31 December 2006:

Payments due by period Less than More than Total 1 year 1-5 years 5 years (£ in millions) Operating lease obligations ...... 79.0 10.1 34.4 34.5 Financial Investments ...... 24.7 2.3 22.4 — Total...... 103.7 12.4 56.8 34.5

The Group’s most significant operating leases are those of the premises at Leadenhall Street, London and in Frankfurt. The Leadenhall lease expires on 30 June 2021 and is subject to a rent review in July 2009 and again in 2014 and 2019. The Frankfurt lease expires in June 2013. The Group is contractually obligated to invest amounts, on behalf of the EPs it has acquired or set-up, in technology development and maintenance and in the development of new processes and systems. Current obligations exist in relation to Xtb and XBS. On 6 March 2007, a subsidiary of Xchanging B.V. entered into an agreement to acquire BAE Systems’ shares in XPS for a consideration of £47 million (£44 million net cash price), which is payable no later than 2 July 2007 and includes an element of interest to be calculated from an effective date of 1 January 2007 up to the date of payment. Further information on this acquisition can be found in paragraph 18.8 of Part 8: Additional Information.

81 Letters of Credit The Group has a number letters of credit currently in place. A letter of credit exists in relation to the Xtb EP for A15 million, which expires on 30 June 2007. A letter of credit exists in relation to the lease commitment for the Group’s property at 34 Leadenhall Street for £8.9 million, which the Group expects to expire on 1 July 2007. There is a commitment to Aon, in relation to the XBS EP, to provide a letter of credit if available free cash falls below £40 million. If over a period of time, available free cash is between £30 million and £40 million, a £10 million letter of credit is required and a £15 million letter of credit will be required if available free cash is below £30 million. These commitments will not apply at any time if the operating profit of XBS exceeds a certain amount.

Distributable reserves Following the Global Offer, an intermediate holding company will be inserted into the Group structure, between Xchanging plc and Xchanging B.V., in a share for share exchange. This company will become a treasury company for the Group, and will seek a Court approved capital reduction to create additional distributable reserves.

Pension liabilities For a discussion of the Group’s pension liabilities, see Risk Factors on pages 15 and 16, Part 7: Regulation, and note 36 contained in Section A of Part 5: Accountants’ Reports and Financial Information and paragraph 11 of Part 8: Additional Information.

Off-Balance Sheet Arrangements Currently, the Group does not have any off-balance sheet arrangements that would require disclosure in its financial statements.

7. CRITICAL ACCOUNTING POLICIES AND ESTIMATES For a discussion of the Group’s principal accounting policies see note 2 contained in Part 5: Accountants’ Reports and Financial Information. Management is required to exercise significant judgment and make use of estimates and assumptions in the application of these policies. Areas which management believes require the most critical accounting judgments are:

Retirement benefit obligations The Group operates a number of defined benefit plans. The retirement benefit obligations recorded are based on actuarial assumptions, including discount rates, expected long-term rate of return on plan assets, inflation and mortality rates. The assumptions are based on current market conditions, historical information and consultation with and input from actuaries. Management reviews these assumptions annually. If they change, or if actual experience is different from the assumptions, the funding status of the plan will change and the retirement benefit obligation will be adjusted accordingly. The assumptions used are detailed in note 36 of Section A of Part 5: Accountants’ Reports and Financial Information. The Group participates in various BAE Systems pension schemes and in the Lloyd’s Pension Scheme. The terms on which the Group participates in these schemes give the Group protection against being required to fund future deficits that arise in the schemes, and against future exit debts that may fall on withdrawal from these schemes. However, in the event of BAE Systems or Lloyd’s becoming insolvent, there is a risk that the Group could become liable to fund the wider pension schemes of these companies in an amount which would materially exceed the Group’s available financial resources. The directors consider that the risk of either of these events is remote and consequently the schemes are accounted for as defined contribution schemes in note 36 of Section A of Part 5: Accountants’ Reports and Financial Information.

82 Estimated impairment of goodwill The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in note 2(j) of the Group’s financial information contained in Part 5: Accountants’ Reports and Financial Information. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of estimates, see note 14 of of Section A of Part 5: Accountants’ Reports and Financial Information.

Exceptional items The directors consider that items of income or expense which are material and non-recurring by virtue of their nature and amount should be disclosed separately if the financial statements are to fairly present the financial position and financial performance of the Group. The directors label these items collectively as ‘‘exceptional items’’.

Calculation of cost and appropriate amortisation period The original cost of developed assets includes project development costs (including appropriate direct internal costs) which are capitalised from the point that it is virtually certain that the project will proceed to completion. The directors consider that this point of virtual certainty is reached when the memorandum of understanding related to the contract is signed by all parties involved. Depreciation of these developed assets is charged so as to write down the value of the asset to its residual value over its estimated useful life.

Taxation The level of tax provisioning is dependent on subjective judgment as to the outcome of decisions to be made by the relevant tax authorities. It is necessary to consider the extent to which deferred tax assets should be recognised based on an assessment of the extent to which they are regarded as recoverable.

Assumptions on put options Two put options are accounted for as financial liabilities under paragraph 23 of IAS 32. These liabilities are measured at the fair value of the future cash flows associated with them. The levels of these cash flows and the relevant discount rates used in the fair value calculations are based on future projections and incorporate a certain element of management judgment.

8. WORKING CAPITAL For a discussion of the Group’s working capital requirements please see paragraph 15 of Part 8: Additional Information.

9. REGULATORY CAPITAL For a discussion of the Group’s regulatory capital requirements please see Part 7: Regulation.

10. CURRENT TRADING AND PROSPECTS In early 2007 the Group completed the buy-outs of BAE Systems’ interests in the XHRS and XPS partnerships for £57 million (a net cash price of £54 million). This will allow the Group to achieve full strategic control over the operations of these partnerships and, in the Group’s opinion, will lead to enhanced contribution from those businesses. With respect to current trading and the prospects for the remainder of 2007, trading remains in line with management expectations. The Group anticipates further growth through additional revenue from existing operations, new EPs and acquisitions.

11. RECENT ACCOUNTING PRONOUNCEMENTS For a discussion of recent accounting pronouncements, please see note 2 to Section A of Part 5: Accountants’ Reports and Financial Information.

83 12. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest rate risk The Group’s interest rate risk arises from its indebtedness. See paragraph 6 of this Part 4: Operating and Financial Review. The Group currently has £19 million of letters of credit outstanding. The Group considers debt financing on a case-by-case basis, assessing variable rate versus fixed rate proposals based on value and term of the facility and projected economic conditions.

Foreign exchange risk The Group’s international operations expose the group to foreign exchange risk. The Group currently operates in a number of foreign currencies (Euro, US Dollar, Indian Rupee, Australian Dollar, Malaysian Ringgit and Thai Baht), of which the only significant transactional foreign currency cash flow exposure is Euros, totalling £97.5 million, which represents 24.8% of total revenues. The Group’s policy is to hedge a proportion of the exchange rate risk on these transactions to leave a level of risk that the Group considers acceptable. The hedging policy adopted does not currently meet the criteria for hedge accounting under IAS 39.

84 PART 5: ACCOUNTANTS’ REPORTS AND FINANCIAL INFORMATION

SECTION A – ACCOUNTANTS’ REPORT AND FINANCIAL INFORMATION FOR XCHANGING B.V. FOR THE THREE FINANCIAL YEARS ENDED 31 DECEMBER 2004, 31 DECEMBER 2005 AND 31 DECEMBER 2006

PricewaterhouseCoopers LLP 1 Embankment Place London WC2N 6RH2NOV200423333498 The Directors Xchanging plc 34 Leadenhall Street London EC3A 1AX

Citigroup Global Markets Limited (the ‘‘Sponsor’’) Citigroup Centre Canada Square Canary Wharf London E14 5LB

25 April 2007

Dear Sirs

Xchanging B.V. We report on the financial information set out in Section A of Part 5: Accountants’ Reports and Financial Information. This financial information has been prepared for inclusion in the prospectus dated 25 April 2007 (the ‘‘Prospectus’’) of Xchanging plc on the basis of the accounting policies set out in note 2. This report is required by item 20.1 of Annex I to the PD Regulation and is given for the purpose of complying with that item and for no other purpose.

Responsibilities The Directors of Xchanging plc are responsible for preparing the financial information in accordance with the basis of preparation set out in note 2 to the financial information. It is our responsibility to form an opinion on the financial information as to whether the financial information gives a true and fair view, for the purposes of the Prospectus, and to report our opinion to you. Save for any responsibility which we may have to those persons to whom this report is expressly addressed and for any responsibility arising under item 5.5.3R(2)(f) of the Prospectus Rules to any person as and to the extent there provided to the fullest extent permitted by law we do not assume any responsibility and will not accept any liability to any other person for any loss suffered by any such other person as a result of, arising out of, or in connection with this report, consenting to its inclusion in the Prospectus.

Basis of opinion We conducted our work in accordance with the Standards for Investment Reporting issued by the Auditing Practices Board in the United Kingdom. Our work included an assessment of evidence relevant to the amounts and disclosures in the financial information. It also included an assessment of significant estimates and judgments made by those responsible for the preparation of the financial information and whether the accounting policies are appropriate to Xchanging B.V.’s circumstances, consistently applied and adequately disclosed.

85 15FEB200619332872

We planned and performed our work so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial information is free from material misstatement whether caused by fraud or other irregularity or error. Our work has not been carried out in accordance with auditing standards generally accepted in the United States of America or auditing standards of the Public Accounting Oversight Board (United States) and accordingly should not be relied upon as if it had been carried out in accordance with those standards.

Opinion In our opinion, the financial information gives, for the purposes of the Prospectus, a true and fair view of the state of affairs of Xchanging B.V. as at the dates stated and of its profits, cash flows and statement of recognised income and expense for the periods then ended in accordance with the basis of preparation set out in note 2 to the financial information.

Declaration For the purposes of Prospectus Rule 5.5.3R(2)(f) we are responsible for this report as part of the Prospectus and declare that we have taken all reasonable care to ensure that the information contained in this report is, to the best of our knowledge, in accordance with the facts and contains no omissions likely to affect its import. This declaration is included in the Prospectus in compliance with item 1.2 of Annex I of the PD Regulation.

Yours faithfully

PricewaterhouseCoopers LLP Chartered Accountants

86 XCHANGING B.V. Income statements — year ended 31 December Notes 2004 2005 2006 £’000 £’000 £’000 Revenue ...... 6 254,139 349,968 393,495 Cost of sales ...... (222,852) (302,560) (348,739) Gross profit ...... 31,287 47,408 44,756 Administrative expenses — pre-exceptional items ...... (12,781) (13,221) (13,693) Administrative expenses — exceptional items ...... 7 (6,931) — (6,906) Administrative expenses ...... (19,712) (13,221) (20,599) Other operating income — exceptional profit on disposal of group companies...... 8 4,758 —— Operating profit — pre-exceptional items...... 18,506 34,187 31,063 Net exceptional items ...... (2,173) — (6,906) Operating profit...... 8 16,333 34,187 24,157 Finance costs...... 11 (6,828) (8,434) (8,351) Finance income...... 11 6,555 8,145 9,114 Profit before taxation...... 16,060 33,898 24,920 Taxation...... 12 (5,672) (11,287) (7,476) Profit for the year...... 10,388 22,611 17,444 Profit attributable to minority interests...... 32 5,412 10,771 6,726 Profit attributable to equity holders of the group...... 28 4,976 11,840 10,718 10,388 22,611 17,444

Earnings per share for profit attributable to the equity holders of the group during the year (expressed in pence per share) — Basic...... 13 2.4 5.8 5.2 — Diluted...... 13 2.3 5.4 4.9

The financial information above may not be representative of future results; for example, the historical capital structure does not reflect the future capital structure. Future interest income and expense, tax charges and earnings per share may be different from those achieved prior to the Global Offer.

87 XCHANGING B.V. Statements of recognised income and expense — year ended 31 December

Notes 2004 2005 2006 £’000 £’000 £’000 Profit for the year...... 10,388 22,611 17,444 Actuarial (losses)/gains arising from defined benefit pension schemes ...... 36 (3,505) (180) 8,017 Movement on deferred tax relating to pension scheme .. 12 944 88 (2,280) Revaluation of available-for-sale financial assets...... 17 — 179 (1,470) Deferred tax on revaluation of available-for-sale financial assets ...... 12 — (211) 316 Deferred tax on share options...... 12 ——2,150 Exchange differences ...... 31 699 7 (360) Net (losses)/gains not recognised in income statement ... (1,862) (117) 6,373

Total recognised income for the year — attributable to minority interests ...... 5,548 11,320 7,369 — attributable to equity shareholders...... 2,978 11,174 16,448 Total...... 8,526 22,494 23,817

88 XCHANGING B.V. Balance sheets — 31 December

Notes 2004 2005 2006 £’000 £’000 £’000 Assets Non-current assets Goodwill...... 14 21,132 21,132 29,362 Intangible assets ...... 15 18,919 28,332 28,471 Property, plant and equipment ...... 16 10,106 11,536 15,096 Available-for-sale financial assets ...... 17 — 22,249 20,441 Trade and other receivables ...... 18 4,101 4,131 6,115 Deferred income tax assets ...... 26 14,534 13,508 16,317 68,792 100,888 115,802 Current assets Trade and other receivables ...... 18 48,572 64,455 74,976 Cash and cash equivalents...... 19 78,872 70,328 58,684 127,444 134,783 133,660 Liabilities Current liabilities Trade and other payables...... 20 (67,383) (74,534) (80,902) Current income tax liabilities...... 21 (2,626) (6,220) (7,129) Borrowings ...... 22 (10,405) (10,644) (3,270) Provisions ...... 25 (6,147) (8,395) (8,720) Net current assets...... 40,883 34,990 33,639 Total assets less current liabilities...... 109,675 135,878 149,441 Non-current liabilities Trade and other payables...... 23 (8,927) (8,094) (9,764) Financial liabilities — Borrowings...... 22 (11,594) (12,303) (13,042) — Other liabilities ...... 24 ——(7,140) Deferred income tax liabilities...... 23, 26 (1,745) (2,281) (2,517) Retirement benefit obligations...... 36 (27,885) (28,512) (21,901) Provisions ...... 25 (18,253) (15,770) (9,447) (68,404) (66,960) (63,811) Net assets...... 41,271 68,918 85,630 Shareholders’ equity Ordinary shares ...... 27 195 199 221 Share premium...... 29 58,671 68,163 82,589 Other reserves ...... 30 (1,696) (974) 1,251 Retained earnings ...... 28 (27,904) (15,696) (10,209) Total shareholders’ equity...... 29,266 51,692 73,852 Minority interest in equity...... 32 12,005 17,226 11,778 Total equity ...... 31 41,271 68,918 85,630

89 XCHANGING B.V. Cash flow statements — year ended 31 December

Notes 2004 2005 2006 £’000 £’000 £’000 Cash flows from operating activities Cash generated from operations...... 34 17,422 34,510 29,433 Income tax paid ...... (4,897) (6,354) (9,404) Net cash from operating activities ...... 12,525 28,156 20,029 Cash flows from investing activities Acquisition expenses ...... (1,730) — (115) Acquisition cost of subsidiaries ...... (11,071) — (6,275) Cash and cash equivalents acquired with subsidiaries ..... 57,134 — 402 Cash invested by minority interests ...... ——50 Purchase of property, plant and equipment ...... (6,965) (5,706) (8,707) Purchase of intangible assets ...... (5,784) (15,509) (7,027) Pre-contract expenditure ...... (2,899) (1,007) (3,223) Proceeds from sale of property, plant and equipment .... 762 1,123 375 Purchase of available-for-sale financial assets...... — (21,799) — Interest received ...... 1,804 2,443 2,846 Net cash generated by/(used in) investing activities...... 31,251 (40,455) (21,674) Cash flows from financing activities Proceeds from issue of shares ...... 282 9,996 1,611 Proceeds from shares not yet issued ...... — 794 — Purchase of own shares ...... — (500) — Transaction costs of shares issued...... ——(325) Proceeds from issue of convertible debt ...... 16,070 —— Interest paid ...... (192) (258) (43) Increase in borrowings...... 12 —— Repayment of borrowings ...... — (27) — Dividend paid to minority interests ...... (7,918) (6,099) (11,591) Net cash from financing activities...... 8,254 3,906 (10,348) Effects of exchange rate changes ...... 562 (151) 349 Net increase/(decrease) in cash and cash equivalents .... 52,592 (8,544) (11,644) Cash and cash equivalents at 1 January...... 26,280 78,872 70,328 Cash and cash equivalents at 31 December...... 19 78,872 70,328 58,684

90 XCHANGING B.V. Notes to the financial information

1 General information Xchanging B.V. and its subsidiaries engage in business processing services, specialising in increasing the efficiency of complex back-office functions to allow their customers to concentrate on their core operations. The group is engaged in business processing services in human resources, procurement, customer administration, finance and accounting and securities processing, and also in the development and sale of computer software packages, mainly for the insurance industry.

2 Principal accounting policies The principal accounting policies applied in the preparation of this financial information are set out below. These policies have been consistently applied to all the years presented.

(a) Basis of preparation of the financial information The financial information has been prepared in accordance with the requirements of the PD regulation and the Listing Rules and in accordance with this basis of preparation. The basis of preparation describes how the financial information has been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS as adopted by the EU) except as described below. IFRS as adopted by the EU does not provide for the specific accounting treatment set out below, and accordingly in preparing the financial information certain accounting conventions commonly used for the preparation of historical financial information for inclusion in investment circulars as described in the Annexure to SIR 2000 (Investment Reporting Standard applicable to public reporting engagements on historical financial information) issued by the UK Auditing Practices Board have been applied. The application of these conventions results in the following material departure from IFRS as adopted by the EU. In other respects IFRS as adopted by the EU has been applied. Given the anticipated change in the Group’s capital structure as a result of the restructuring, the directors of the group do not believe the group’s historical earnings per share figures to be meaningful. Therefore, they have not been presented in the consolidated financial information. Instead, the earnings per share figures have been presented based upon the number of shares in Xchanging plc after taking into account the restructuring of the Company’s share capital as described in paragraph 3.5 of Part 8: Additional Information of this document (including New Shares), representing the earnings per share that would have been disclosed if Xchanging plc had been the parent entity of the group throughout the period presented. Both the functional currency and the presentation currency of the financial information is sterling due to the group being managed in the UK and the majority of transactions being denominated in sterling. The financial information has been prepared under the historical cost convention as modified by the revaluation of available-for-sale investments, financial assets and liabilities held for trading. A summary of the more important group accounting policies is set out below, together with an explanation of where changes have been made to previous policies on the adoption of new accounting standards in the year. The preparation of financial information in conformity with EU endorsed IFRS requires the use of judgments, estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial information and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management’s best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates. The accounting policy descriptions set out the areas where significant judgments, estimates and assumptions have been made. IFRS 7 ‘‘Financial Instruments: Disclosures’’ which is mandatory for periods beginning on or after 1 January 2007, has been adopted early in this financial information. This introduces new disclosure requirements for the group’s financial instruments.

91 XCHANGING B.V. Notes to the financial information (Continued)

(b) Basis of consolidation The group financial information consolidates the company and all of its subsidiary undertakings. Subsidiary undertakings include those companies in which the company has a 50% equity stake, commonly referred to by the directors as ‘‘enterprise partnerships’’, but over which the company has overall operational and financial control. Interests acquired in subsidiary undertakings are consolidated from the date control passes to the acquirer. Transactions and balances between group companies are eliminated. The interest of minority shareholders in the balance sheet is stated at the minority’s proportion of the fair values of the assets and liabilities recognised.

(c) Business combinations Business combinations are accounted for under IFRS 3. A business combination is deemed to have occurred where the group acquires a third party business, either in whole or in part so that it obtains control of that business. The assets and liabilities acquired with the business are fair valued on the date of acquisition and any difference between the fair value of purchase consideration (and direct expenses of acquisition) and the fair value of the net assets, including intangibles, is recognised as goodwill.

(d) Segment reporting A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns which are different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that are subject to risks and returns which are different from those of segments operating in other economic environments. (e) Revenue recognition Group revenue, which excludes value added tax, rebates and discounts, comprises the value of services provided for customer administration, human resources, procurement services, securities processing and software sales. The group provides administration services to the insurance market, from which there are three principal sources of revenue. These, together with the bases of revenue recognition, are set out below: (i) Revenue in respect of the provision of administration services comprises amounts receivable for subscription fees, a transaction charge for the provision of administration services and other ad hoc services. Subscription fees are recognised in the income statement on a straight-line basis according to the period to which they relate. Transactional revenue for these services is recognised in the period in which the transaction takes place. Ad-hoc revenue is recognised in the period in which the service is provided. (ii) Revenue in respect of business process services contracts is divided into an implementation phase and a service provision phase. Revenue in respect of the implementation phase is accounted for on a long-term contract basis. Revenue and attributable profit is recognised on a percentage completion basis representing the stage of completion of contractual obligations. Revenue in respect of the provision of post-implementation administration services to business process services customers is recognised in the period to which the service relates. (iii) Revenue in respect of the rental or maintenance of computer software programmes is recognised as earned. Billings are included in trade receivables in accordance with the terms of the relevant rental or maintenance contract. To the extent that billings are recorded in advance of the relevant revenue, such advance billings are included in deferred income. The income arising from the sale of an initial licence is recognised over the period of implementation of the software. Revenue from the provision of securities processing services is recognised on a straight-line basis according to the period to which the service relates, net of guaranteed rebates to customers.

92 XCHANGING B.V. Notes to the financial information (Continued)

Revenue from the provision of human resources services is recognised on a straight-line basis according to the period to which the service relates, net of guaranteed rebates to customers. Revenue from other HR services is recognised only when all obligations are fulfilled. Revenue from the provision of procurement services is recognised on a gross basis where the group is responsible for the whole supply chain process and associated business process from end-to-end. Where the group acts as an agent, revenue is recognised on a net basis. Revenue is recognised on a straight-line basis, net of guaranteed rebates to customers, according to the period to which the service relates and only when all obligations are fulfilled.

(f) Finance costs Finance costs are charged to the income statement using the effective interest rate method.

(g) Finance income Interest income is reported in the income statement as it arises through the application of the effective interest rate method.

(h) Dividend distribution Dividend distribution to the company’s shareholders is recognised as a liability in the group’s financial statements in the period in which the dividends are approved by the company’s shareholders.

(i) Foreign currency transactions (i) Functional and presentation currency Items included in the financial statements of each of the group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘‘the functional currency’’). The consolidated financial statements are presented in sterling which is the group’s functional and presentation currency.

(ii) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement. Translation differences on non-monetary financial assets, such as equities classified as available-for-sale, are included in the fair value reserve in equity.

(iii) Group companies The results and financial position of all the group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet; income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and all resulting exchange differences are recognised as a separate component of equity. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

93 XCHANGING B.V. Notes to the financial information (Continued)

(j) Goodwill Goodwill, arising from the purchase of subsidiary undertakings, represents the excess of the fair value of the consideration paid over the fair value of the identifiable net assets (including intangible assets) acquired. Goodwill is capitalised as an intangible asset. Impairment reviews are performed annually to ensure the present value of estimated future net income streams from the associated contracts, being the cash-generating units to which the goodwill is allocated, and discounted using discount rates specific to each sector, exceeds the goodwill capitalised.

(k) Intangible assets Development costs are stated at cost less a provision for amortisation and any provision for impairment. Research costs are expensed as incurred. Costs incurred during the development period of new contracts, including the costs of process and system designs that substantially improve those processes and systems already installed in the enterprise partnerships, are treated as development costs. These costs are capitalised. Costs that are capitalised comprise directly attributable incremental costs incurred during the development period, including wages and salaries of staff employed solely for the purpose of improving the processes and systems, and third party costs. Development costs do not include restructuring costs, (including redundancy, early termination penalties and such like), which are expensed to the income statement as they are incurred. Amortisation of development costs occurs on a straight line basis over the life of the contract to which they relate (between 6 and 12 years). This period represents the useful life of the intangible asset. Software costs are capitalised where they meet the criteria for recognition under IAS 38. Where the criteria for capitalisation are not met, software development expenditure is expensed as incurred. Software development costs are amortised on a straight line basis on an annual rate of 20% or over the life of the related contract, if longer, so as to write off the asset cost on a straight-line basis over the expected useful economic life. Subsequent expenditure undertaken to ensure that an asset maintains its previously assessed standard of performance, for example routine repairs and maintenance expenditure, is recognised in the income statement as it is incurred. Where subsequent expenditure significantly enhances an asset, this is capitalised. Contractual customer relationships are capitalised on acquisition where they meet the criteria for recognition under IFRS 3 and IAS 38. Amortisation of customer contractual relationships occurs in line with the period from which future value is expected to be earned, which is between one and seven years.

(l) Negative goodwill Where the fair value of the separable net assets exceeds the fair value of the consideration for an acquired undertaking the difference is treated as negative goodwill and is taken to the income statement in the year of acquisition.

(m) Property, plant and equipment The cost of tangible fixed assets is their purchase cost, together with any incidental costs of acquisition. Assets in the course of development are not depreciated until completion at which point they are transferred to the relevant fixed asset category.

94 XCHANGING B.V. Notes to the financial information (Continued)

Depreciation is calculated so as to write off the cost of tangible fixed assets, less their estimated residual values, on a straight-line basis over the expected useful economic lives of the assets concerned. The principal annual rates used for this purpose are: Computer equipment ...... 20–33% Fixtures and fittings...... 10–25% Leasehold improvements...... over the period of the lease Motor vehicles...... 25%

(n) Impairment of tangible and intangible assets At each balance sheet date, management reviews its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. Intangible assets are reviewed if a trigger event is deemed to have happened. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the group estimates the recoverable amount of the cash-generating unit to which the asset belongs. An intangible asset with an indefinite useful life is tested for impairment annually and whenever there is an indication that the asset may be impaired. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects the current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately. Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately.

(o) Financial instruments (i) Financial assets The group classifies its financial assets in the following categories: loans and receivables and available-for-sale. The classification depends on the purpose for which the financial assets were acquired. The group determines the classification of its financial assets at initial recognition. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the balance sheet date. These are classified as non-current assets. Loans and receivables are classified as ‘‘trade and other receivables’’ in the balance sheet (note 2(q)). Available-for-sale financial assets Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the balance sheet date. Regular purchases and sales of financial assets are recognised on the trade-date – the date on which the group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have

95 XCHANGING B.V. Notes to the financial information (Continued) been transferred and the group has transferred substantially all risks and rewards of ownership. Available-for-sale financial assets are subsequently carried at fair value. Loans and receivables are carried at amortised cost using the effective interest method. Changes in the fair value of monetary and non-monetary securities classified as available-for-sale are recognised in equity. When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments recognised in equity are included in the income statement as ‘‘gains and losses from investment securities’’. Dividends on available-for-sale equity instruments are recognised in the income statement as part of finance income when the group’s right to receive payments is established. The fair values of quoted investments are based on current bid prices. The group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of equity securities classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is considered as an indicator that the securities are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss – is removed from equity and recognised in the income statement. Impairment losses recognised in the income statement on equity instruments are not reversed through the income statement. Impairment testing of trade receivables is described in note 2(q).

(ii) Convertible debt Short term and long term convertible loans are classified as loans and are separated into debt and equity elements upon initial recognition. The liability is measured at amortised cost using the effective interest rate method. The effective interest rate is the market rate in effect at the date of inception of the instrument. The initial carrying amount is then accreted over the expected life of the instrument to the face amount payable on maturity. The equity element is recognised directly in the equity reserves and not subsequently re-measured during the life of the instrument. On conversion of the convertible debt, the fair value of the liability together with the portion recognised in equity is transferred to share capital and share premium.

(p) Put options granted to minority shareholders In accordance with IAS 32, when minority interests hold put options that enable them to sell their investments to the group, the net present value of the future payment is reflected as a financial liability in the consolidated balance sheet. At the end of each period, the valuation of the liability is reassessed with any changes recognised in the income statement for the period.

(q) Trade and other receivables Trade and other receivables are recognised at fair value and subsequently measured at amortised cost less provision for impairment. Pre-contract costs comprise legal and other professional expenses and other directly attributable staff costs incurred in order to obtain specific customer contracts. Costs that are directly attributable to a contract are capitalised when it is virtually certain that the contract will be awarded and the contract will result in future net cash inflows with a present value at least equal to all amounts recognised as an asset. Pre-contract costs are included within trade and other receivables and are amortised over the life of the contract, starting from the date when the contract commences.

96 XCHANGING B.V. Notes to the financial information (Continued)

(r) Cash and cash equivalents Cash and cash equivalents include cash in hand, demand deposits and short term highly liquid investments which are readily convertible to cash and are subject to minimal risk of changes in value.

(s) Trade and other payables Trade and other payables are recognised at fair value and subsequently measured at amortised cost.

(t) Operating and finance leases Rental costs under operating leases are charged to the income statement on a straight-line basis over the lease term. Lease incentives provided by lessors to the group are amortised over the lease term together with any related costs of acquiring the lease. Assets held under finance leases are initially reported at the lower of the fair value of the assets and the present value of minimum lease payments with an equivalent liability categorised as appropriate liabilities due within or after one year. The asset is depreciated over the shorter of the lease term and its useful economic life. Finance charges are allocated to accounting periods over the period of the lease to produce a constant rate of return on the outstanding balance.

(u) Taxation including deferred taxation Current tax is recognised at the amount expected to be paid to (or recovered from) the taxation authorities using the tax rates and laws that have been enacted or substantially enacted by the balance sheet date. Deferred tax is recognised in respect of all temporary differences that have originated but not reversed at the balance sheet date where transactions or events that result in an obligation to pay more, or a right to pay less, tax in the future have occurred at the balance sheet date. Deferred tax assets are regarded as recoverable and therefore recognised, only when, on the basis of all available evidence, the directors consider that it is more likely than not that there will be suitable taxable profits from which the future reversal of the underlying temporary differences can be deducted.

(v) Employee benefit costs (i) Pension obligations The group operates, or participates in, both defined contribution and defined benefit pension schemes. All the pension schemes are accounted for in accordance with IAS 19. Professional independent actuaries value the defined benefit schemes triennially and the valuations were updated at each year-end. The directors believe that this is sufficiently regular so that the amounts do not differ materially from expectations at the year end. Scheme assets are measured using closing market values at the balance sheet date. Pension scheme liabilities are measured using the projected unit method and discounted at the current rate of return on a high quality corporate bond of equivalent term and currency to the liability. Variations between the scheme assets and liabilities identified as a result of these actuarial valuations (actuarial gains and loses) are recognised in full through the statement of recognised income and expense (SORIE) in that year. Current service costs, expected returns on plan assets and interest costs are charged to the income statement. Past-service costs are recognised immediately in income, unless the changes to the pension plan are conditional on the employees remaining in service for a specified period of time (the vesting period). In this case, the past-service costs are amortised on a straight-line basis over the vesting period. The group participates in a number of defined benefit schemes which are multi employer schemes and where insufficient information exists to be able to account for the schemes as defined benefit plans as there is no consistent and reliable basis for allocating the obligations, plan assets and costs to individual entities participating in these schemes. In accordance with IAS 19 such schemes are

97 XCHANGING B.V. Notes to the financial information (Continued)

accounted for as defined contribution schemes and contributions are charged to the income statement as incurred. Contributions to the defined contribution schemes are charged to the income statement as incurred.

(ii) Share based compensation The group operates a number of equity-settled, share-based compensation plans. The fair value of the employee services received in exchange for the grant of the options is recognised as an expense. The total amount to be expensed over the vesting period is determined by reference to the fair value of the options granted, excluding the impact of any non-market vesting conditions (for example, profitability and sales growth targets). Non-market vesting conditions are included in assumptions about the number of options that are expected to vest. At each balance sheet date, the entity revises its estimates of the number of options that are expected to vest. It recognises the impact of the revision to original estimates, if any, in the income statement, with a corresponding adjustment to equity. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the options are exercised. (w) Provisions Provisions are recognised when a present obligation exists as the result of a past event and it is probable that this will result in an outflow of economic benefit, the size of which can be reliably estimated. Where the provision is long term, such as onerous contract provisions where the unavoidable costs of meeting obligations exceed any economic benefits expected to be received, the net cash flows are discounted using the group’s appropriate pre-tax discount rate. Restructuring provisions are only recognised if an obligation exists at the balance sheet date i.e. a formal plan exists and those affected by that plan have a valid expectation that the restructuring will be carried out.

(x) Share capital Share capital comprises the nominal value of all issued shares. On subscribing for shares any excess consideration over the nominal value of the shares issued less any issue costs is credited to the share premium account.

(y) Fair value estimation The fair values of short-term loans and overdrafts with a maturity of less than one year are assumed to approximate to their book values. For loans due in more than one year the fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the market interest rate available to the group for similar financial instruments. The fair value for available-for-sale investments is based on their quoted market price.

(z) Exceptional items Exceptional items are events or transactions that fall within the activities of the group and which by virtue of their size or incidence have been disclosed in order to improve a reader’s understanding of the financial information.

3 Financial risk management The group’s operations expose it to a variety of financial risks. The group manages these risks under financial risk management policies, which the Board reviews and agrees. These policies are regularly reviewed. The group’s financial instruments comprise borrowings, cash and liquid resources and various items, such as trade receivables and trade payables that arise directly from its operations. The group also enters into derivative transactions (principally forward foreign currency contract options). The purpose of such transactions is to provide an operational hedge for certain currency risks arising from the group’s operations.

98 XCHANGING B.V. Notes to the financial information (Continued)

It is the group’s policy that no trading in financial instruments or speculative transactions be undertaken.

Interest rate risk The group reviews its interest rate profile against acceptable risk profiles. Currently the group has a number of letters of credit, with interest rates on a fixed basis. The group considers debt financing on a case by case basis, assessing variable rate versus fixed rate proposals based on value and term of the facility and projected economic conditions. Working capital is generally held in variable rate operational accounts, with surplus cash placed on fixed rate short term deposits.

Foreign exchange risk The group’s international operations expose the group to foreign exchange risk. The group currently operates in a number of foreign currencies (Euro, US dollar, Indian rupee, Australian dollar, Malaysian ringgit and Thai baht), of which the only significant transactional foreign currency cash flow exposure is Euros. These cash flows may be hedged using forward foreign contracts or currency options/swaps. The group’s policy is to hedge a proportion of the exchange rate risk on these transactions to leave an acceptable level of risk. The hedging policy adopted does not currently meet the criteria for hedge accounting under IAS 39.

Liquidity risk The group actively manages its liquidity risk through cash management, including detailed weekly short term and monthly long term cash flow forecasting, which support regular reviews of funding strategies. The group’s policy is to ensure that all projected borrowing needs are covered by committed facilities.

Market risk The group holds listed investments (CAD IT). These investments are reviewed on a regular basis as to their suitability according to the group’s risk profile.

Credit risk The group has a concentration of credit risk with respect to trade receivables due to the nature and structure of the enterprise partnerships. Credit risk assessments are performed when signing up to a new enterprise partnership and for new customers.

Commodity risk Commodity risk is not considered to be applicable to the group as the group does not perform material transactions of commodities.

4 Critical accounting judgments The group’s principal accounting policies are set out in note 2 to this financial information. Management is required to exercise significant judgment and make use of estimates and assumptions in the application of these policies. Areas which management believes require the most critical accounting judgments are: (i) Retirement benefit obligations The group operates a number of defined benefit plans. The retirement benefit obligations recorded are based on actuarial assumptions, including discount rates, expected long-term rate of return on plan assets, inflation and mortality rates. The assumptions are based on current market conditions, historical information and consultation with and input from actuaries. Management reviews these assumptions annually. If they change, or if actual experience is different from the

99 XCHANGING B.V. Notes to the financial information (Continued)

assumptions, the funding status of the plan will change and the retirement benefit obligation will be adjusted accordingly. The assumptions used are detailed in note 36. Xchanging participates in various BAE Systems pension schemes and in the Lloyd’s Pension Scheme. The terms on which Xchanging participates in these schemes give Xchanging protection against being required to fund future deficits that arise in the schemes, and against future exit debts that may fall on withdrawal from these schemes. However, in the event of BAE or Lloyd’s becoming insolvent, there is a risk that Xchanging could become liable to fund the wider pension schemes of these companies. The directors consider that the risk of either of these events is extremely remote and consequently the schemes are accounted for as defined contribution schemes as per note 36. (ii) Estimated impairment of goodwill The group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in 2(j). The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of estimates (see note 14). (iii) Exceptional items The directors consider that items of income or expense which are material and non-recurring by virtue of their nature and amount should be disclosed separately if the financial information is to fairly present the financial position and financial performance of the group. The directors label these items collectively as ‘‘exceptional items’’. (iv) Calculation of cost and appropriate amortisation period The original cost of developed assets includes project development costs (including appropriate direct internal costs) which are capitalised from the point that it is virtually certain that the project will proceed to completion. The directors consider that this point of virtual certainty is reached when the memorandum of understanding related to the contract is signed by all parties involved. Depreciation of these developed assets is charged so as to write down the value of the asset to its residual value over its estimated useful life. (v) Taxation The level of tax provisioning is dependent on subjective judgment as to the outcome of decisions to be made by the relevant tax authorities. It is necessary to consider the extent to which deferred tax assets should be recognised based on an assessment of the extent to which they are regarded as recoverable. (vi) Assumptions on put options Two put options are accounted for as financial liabilities under paragraph 23 of IAS 32. These liabilities are measured at the fair value of the future cash flows associated with them. The levels of these cash flows and the relevant discount rates used in the fair value calculations are based on future projections and incorporate a certain element of management judgment.

5 Segmental information Types of products and services from which each reportable segment derives its revenues: The group has three reportable business segments for financial reporting purposes: Insurance, Financial Markets and Business Lines. In both of the Insurance and Financial Markets sectors the group provides industry-specific BPO services and software to customers. Business Lines is a cross-industry sector in which the group provides procurement, human resources, finance and accounting and IT hosting services. These three operating sectors are supported by the group’s offshore business processing services facility (‘‘BPS’’) and ‘‘Corporate’’, which provides the

100 XCHANGING B.V. Notes to the financial information (Continued) infrastructure, resources, and investment to sustain and grow the business, including sales and commercial, performance management, implementation and business management functions.

Measurement of operating segment profit and loss, assets and liabilities: The accounting policies of the operating segments are the same as those described in note 2. Xchanging measures segmental performance on operating profit before exceptional items, share based payments related to the granting of share options and amortisation of intangible assets previously unrecognised by an acquired entity. Xchanging’s reportable segments account for inter segment sales and transfers as if the sales or transfers were to third parties i.e. at current market prices.

101 XCHANGING B.V. Notes to the financial information (Continued)

Reportable segment profit or loss, assets and liabilities Segmental information – 2004

Business Financial BPS and Lines Insurance Markets Corporate Total £’000 £’000 £’000 £’000 £’000 Reportable segment profit and loss Revenue...... 83,673 109,669 62,956 — 256,298 — from external customers ...... 83,090 108,093 62,956 — 254,139 — inter segment...... 583 1,576 ——2,159 Depreciation and amortisation. 2,332 1,848 807 3,594 8,581 Adjusted operating profit/ (loss) ...... 12,353 16,135 4,067 (13,538) 19,017 Adjusted operating profit percentage...... 14.8% 14.7% 6.5% 7.4% Exceptional items...... (3,013) (1,506)(1) 4,758 (2,412) (2,173) Adjustment of certain non cash items: — Share based payments...... (16) (16) (2) (171) (205) — Amortisation of intangible assets previously unrecognised by an acquired entity ...... (153) (153) ——(306) Operating profit/(loss)...... 9,171 14,460 8,823 (16,121) 16,333 Allocation of central costs: — Investment in enterprise partnerships...... (228) — (1,925) 2,153 — — Depreciation and amortisation ...... (412) (303) (168) 883 — — Other ...... (84) (586) — 670 — Segment result...... 8,447 13,571 6,730 (12,415) 16,333 — Finance costs ...... (6,828) — Finance income...... 6,555 — Taxation...... (5,672) Profit for the year ...... 10,388

Reportable segment assets Reportable segment assets...... 29,415 44,543 50,727 59,242 183,927 — Deferred tax assets ...... 14,534 — Inter segment assets ...... (2,225) Total assets...... 196,236 Expenditures from reportable segment non-current assets... 7,300 7,213 9,346 22,436 46,295 Reportable segment liabilities Reportable segment liabilities .. 31,976 38,969 40,189 19,686 130,820 — Deferred tax liabilities ...... 1,745 — Inter segment liabilities...... (2,225) — Taxation payable ...... 2,626 — Borrowings...... 21,999 Total liabilities ...... 154,965

(1) Impairment of the Riskwrite insurance software platform.

102 XCHANGING B.V. Notes to the financial information (Continued)

Segmental information – 2005

Business Financial BPS and Lines Insurance Markets Corporate Total £’000 £’000 £’000 £’000 £’000 Reportable segment profit and loss Revenue...... 143,939 116,903 96,753 — 357,595 — from external customers ...... 138,747 114,632 96,589 — 349,968 — inter segment...... 5,192 2,271 164 — 7,627 Depreciation and amortisation. 2,416 1,802 1,445 4,078 9,741 Adjusted operating profit/ (loss)...... 17,555 19,061 13,605 (15,348) 34,873 Adjusted operating profit percentage...... 12.2% 16.3% 14.1% 9.7% Adjustment of certain non cash items: — Share based payments...... (40) (23) (14) (291) (368) — Amortisation of intangible assets previously unrecognised by an acquired entity ...... (159) (159) ——(318) Operating profit/(loss)...... 17,356 18,879 13,591 (15,639) 34,187 Allocation of central costs: — Investment in enterprise partnerships...... (210) (440) (388) 1,038 — — Depreciation and amortisation ...... (379) (76) (406) 861 — — Other ...... (169) (1,171) — 1,340 — Segment result...... 16,598 17,192 12,797 (12,400) 34,187 — Finance costs ...... (8,434) — Finance income...... 8,145 — Taxation...... (11,287) Profit for the year ...... 22,611 Reportable segment assets Reportable segment assets...... 47,855 51,553 76,065 63,040 238,513 — Deferred tax assets ...... 13,508 — Inter segment assets ...... (16,350) Total assets...... 235,671 Expenditures from reportable segment non-current assets... 2,100 6,029 8,643 4,443 21,215 Reportable segment liabilities Reportable segment liabilities .. 42,177 43,329 52,555 13,594 151,655 — Deferred tax liabilities ...... 2,281 — Inter segment liabilities...... (16,350) — Taxation payable ...... 6,220 — Borrowings...... 22,947 Total liabilities ...... 166,753

103 XCHANGING B.V. Notes to the financial information (Continued)

Segmental information – 2006

Business Financial BPS and Lines Insurance Markets Corporate Total £’000 £’000 £’000 £’000 £’000 Reportable segment profit and loss Revenue...... 176,076 135,678 96,177 — 407,931 — from external customers ...... 165,158 132,393 95,944 — 393,495 — inter segment...... 10,918 3,285 233 — 14,436 Depreciation and amortisation. 3,273 2,567 2,588 4,728 13,156 Adjusted operating profit/ (loss)...... 14,182 23,175 12,530 (17,600) 32,287 Adjusted operating profit percentage...... 8.1% 17.1% 13.0% 7.9% Exceptional items...... (460) (1,793) — (4,653) (6,906) Adjustment of certain non cash items: — Share based payments...... (46) (14) (17) (418) (495) — Amortisation of intangible assets previously unrecognised by an acquired entity ...... (394) (335) ——(729) Operating profit/(loss)...... 13,282 21,033 12,513 (22,671) 24,157 Allocation of central costs: — Investment in enterprise partnerships...... — (893) — 893 — — Depreciation and amortisation ...... (369) (35) (527) 931 — — Other ...... (331) (1,184) (494) 2,009 — Segment result...... 12,582 18,921 11,492 (18,838) 24,157 — Finance costs ...... (8,351) — Finance income...... 9,114 — Taxation...... (7,476) Profit for the year ...... 17,444 Reportable segment assets Reportable segment assets...... 68,517 62,314 51,402 78,508 260,741 — Deferred tax assets ...... 16,317 — Inter segment assets ...... (27,596) Total assets...... 249,462 Expenditures from reportable segment non-current assets... 6,037 8,448 2,674 8,125 25,284 Reportable segment liabilities Reportable segment liabilities .. 58,362 48,119 34,491 17,350 155,330 — Deferred tax liabilities ...... 2,517 — Inter segment liabilities...... (24,596) — Taxation payable ...... 7,129 — Borrowings...... 16,312 — Put option liability...... 7,140 Total liabilities ...... 163,832

104 XCHANGING B.V. Notes to the financial information (Continued)

Geographical information

2004 2005 2006 £’000 £’000 £’000 Revenue by geographical destination United Kingdom...... 180,210 224,482 288,395 Continental Europe ...... 70,577 118,276 99,835 Rest of the world ...... 3,352 7,210 5,265 254,139 349,968 393,495

Segment assets by location

2004 2005 2006 £’000 £’000 £’000 United Kingdom...... 131,808 151,741 189,601 Continental Europe ...... 48,774 72,736 49,499 Rest of the world ...... 3,929 7,886 8,621 Segmental assets...... 184,511 232,363 247,721 — Deferred tax assets ...... 14,534 13,508 16,317 — Inter segment assets ...... (2,809) (10,200) (14,576) Total assets...... 196,236 235,671 249,462

Expenditure from segment non current assets

2004 2005 2006 £’000 £’000 £’000 United Kingdom...... 36,933 12,571 22,094 Continental Europe ...... 9,362 8,644 2,675 Rest of the world ...... ——515 46,295 21,215 25,284

6 Analysis of revenue by category

2004 2005 2006 £’000 £’000 £’000 Revenue by category Revenue from services...... 252,845 346,386 389,620 Sale of goods ...... 1,294 3,582 3,875 254,139 349,968 393,495

105 XCHANGING B.V. Notes to the financial information (Continued)

7 Expenses by nature

Note 2004 2005 2006 £’000 £’000 £’000 Cost of goods and services directly related to sales .. 39,945 84,003 105,000 Direct staff costs ...... 9 105,824 135,018 142,839 Other staff related costs ...... 18,337 19,999 24,582 Technology and communications...... 36,027 46,251 47,393 Property costs ...... 15,807 17,197 20,911 Depreciation, amortisation and impairment charges. 8,581 9,741 13,156 Other costs...... 11,112 3,572 8,551 Exceptional items...... 6,931 – 6,906 Total cost of sales and administrative expenses ...... 242,564 315,781 369,338

Exceptional costs comprise the following:

2004 2005 2006 £’000 £’000 £’000 Legal and professional fees in relation to group restructuring including costs associated with the Global Offer...... ——3,398 Staff costs relating to group restructuring...... ——1,866 Costs incurred migrating customers onto new software package...... ——1,642 Integration of RebusIS acquisition...... 5,425 —— Software impairment ...... 1,506 —— Total exceptional items...... 6,931 — 6,906 Minority interests’ share of exceptional items ...... 753 — 821 Tax on exceptional items...... 2,233 — 1,256 Minority interests’ share of tax on exceptional items...... 226 — 240

106 XCHANGING B.V. Notes to the financial information (Continued)

8 Operating profit

2004 2005 2006 £’000 £’000 £’000 Operating profit is stated after charging/(crediting): Staff costs (note 9)...... 105,824 135,018 142,839 Exceptional items excluding exceptional loss and exceptional impairment below (note 7) ...... 5,022 — 6,906 Exceptional loss on disposal of fixed assets (note 7)...... 403 —— Exceptional impairment of intangibles (note 7)...... 1,506 —— Depreciation of property, plant and equipment – owned assets ...... 3,416 3,814 4,554 – assets held under finance leases...... 124 111 180 Net amortisation of intangible assets...... 4,625 5,132 7,541 Amortisation of pre-contract costs ...... 416 684 881 Release of unutilised restructuring provision...... ——(1,022) Impairment of trade receivables ...... 175 514 209 Operating leases – land and buildings ...... 9,237 9,187 10,493 – plant and machinery...... 478 787 667 Foreign exchange (gain)/loss ...... (31) 155 438 Loss on disposal of fixed assets ...... 40 126 45 Exceptional profit on disposal of group company (note 35)...... 4,758 —— Auditors’ remuneration – audit services...... 534 659 838 – non-audit services ...... 534 763 1,862

Fees payable to the group’s auditors in the year were as follows:

2004 2005 2006 £’000 £’000 £’000 Audit services Fees payable to the company’s auditors for the audit of the parent and consolidated accounts...... 79 98 193 Fees payable to the company’s auditors for other services The audit of the company’s subsidiaries...... 455 561 645 Other services pursuant to legislation...... 156 686 784 Tax services...... 313 77 254 Transaction related services...... 65 — 632 All other services ...... ——272 1,068 1,422 2,700

107 XCHANGING B.V. Notes to the financial information (Continued)

9 Employees

Notes 2004 2005 2006 £’000 £’000 £’000 Staff costs for the group during the year Wages and salaries ...... 86,104 112,384 120,440 Social security costs...... 10,967 13,401 14,653 Other pension costs – defined contribution schemes...... 6,148 5,824 4,270 Other pension costs – defined benefit schemes...... 2,914 3,958 3,478 Share based payments...... 27a 205 368 495 106,338 135,935 143,336 Staff costs included within exceptional costs Staff costs relating to group restructuring ...... 7 ——1,866

Included within: Operating expenses ...... 8 105,824 135,018 142,839 Finance costs...... 514 917 497 106,338 135,935 143,336

2004 2005 2006 Number Number Number Average number of persons (including executive directors) employed by business group...... 2,465 3,116 3,449 Business Lines ...... 635 726 863 Insurance ...... 1,187 1,276 1,471 Financial Markets ...... 511 875 810 BPS and Corporate...... 132 239 305

10 Directors and key management

2004 2005 2006 £’000 £’000 £’000 Key management compensation Salaries and short term employee benefits ...... 4,146 5,120 3,816 Post-employment benefits ...... 28 6 22 Termination benefits...... ——410 Share based payments ...... 138 156 284 4,312 5,282 4,532

The key management figures given above include the Xchanging B.V. directors and all members of the Xchanging Executive Committee, which comprises the key members of executive management.

2004 2005 2006 £’000 £’000 £’000 Directors Aggregate emoluments...... 683 1,702 1,434 Highest paid director Aggregate emoluments...... 653 939 511

108 XCHANGING B.V. Notes to the financial information (Continued)

Directors’ emoluments Emoluments in respect of the year to 31 December 2004 are shown below:

Fee/basic salary Bonus Benefits Total £’000 £’000 £’000 £’000 D Andrews ...... 500 150 3 653 J Bramley ...... 30 ——30 D Hodgson...... ———— T Tinsley...... ———— Emoluments in respect of the year to 31 December 2005 are shown below:

Fee/basic salary Bonus Benefits Total £’000 £’000 £’000 £’000 D Andrews ...... 500 400 39 939 J Bramley ...... 40 ——40 S Brenninkmeijer(1) ...... 8 —— 8 A Browne(1)...... 59 47 1 107 D Hodgson...... ———— R Houghton(2)...... 282 282 12 576 F Janssen(2)...... ———— J Maret(1) ...... 6 —— 6 J Robins(1) ...... 26 ——26 T Tinsley...... ————

(1) Appointed 18 October 2005 (2) Appointed 23 February 2005 Emoluments in respect of the year to 31 December 2006 are shown below:

Fee/Basic salary Bonus Benefits Total £’000 £’000 £’000 £’000 D Andrews ...... 500 — 11 511 J Bramley(1) ...... 36 ——36 S Brenninkmeijer ...... 40 ——40 A Browne ...... 300 — 6 306 D Hodgson...... ———— R Houghton...... 330 — 8 338 F Janssen...... 3 —— 3 J Maret ...... 34 ——34 D Millard(2) ...... 34 ——34 N Rich(3) ...... 7 —— 7 J Robins...... 125 ——125 T Tinsley...... ————

(1) Resigned 28 November 2006 (2) Appointed 26 April 2006 (3) Appointed 28 November 2006

Directors’ pension information No directors accrued any retirement benefits under defined contribution or defined benefit schemes in 2004, 2005 and 2006.

109 XCHANGING B.V. Notes to the financial information (Continued)

Directors’ shares The beneficial interests of the directors at 31 December 2004 in the share capital of the company are shown below.

Common Common Common class A class B class C Common Scheme Class G shares of shares of shares of shares of shares of shares of Euro 0.01 Euro 0.01 Euro 0.01 Euro 0.01 Euro 0.01 Euro 0.01 2004 each each each each each each At 1 January 2004 D Andrews ...... 1,785,714 1,785,714 1,785,715 3,000,000 — 44,444 J Bramley ...... ———17,500 62,500 — At 31 December 2004 D Andrews ...... 1,785,714 1,785,714 1,785,715 3,000,000 — 44,444 J Bramley ...... ———17,500 62,500 — Save as stated above, during the course of the year, no director, nor any member of their immediate family, had any other interest in the share capital of the company or any of its subsidiaries. The beneficial interests of the directors at 31 December 2005 in the share capital of the company are shown below.

Common Common Common class A class B class C Common Scheme Class G shares of shares of shares of shares of shares of shares of Euro 0.01 Euro 0.01 Euro 0.01 Euro 0.01 Euro 0.01 Euro 0.01 2005 each each each each each each At 1 January 2005 or date of appointment D Andrews...... 1,785,714 1,785,714 1,785,715 3,000,000 — 44,444 J Bramley ...... ———17,500 62,500 — S Brenninkmeijer ...... ————62,500 — A Browne...... ———125,500 125,000 3,333 R Houghton...... ———150,000 125,000 3,333 J Maret...... —————3,333 J Robins...... ———17,500 62,500 — At 31 December 2005 D Andrews...... 1,785,714 — 1,785,715 3,000,000 — 44,444 J Bramley ...... ———17,500 62,500 — S Brenninkmeijer(1) ...... ————62,500 — A Browne(1)...... ———125,500 125,000 3,333 R Houghton(2) ...... ———150,000 125,000 3,333 J Maret(1)...... —————3,333 J Robins(1) ...... ———17,500 62,500 —

(1) Appointed 18 October 2005 (2) Appointed 23 February 2005 Save as stated above, during the course of the year, no director, nor any member of their immediate family, had any other interest in the share capital of the company or any of its subsidiaries.

110 XCHANGING B.V. Notes to the financial information (Continued)

The beneficial interests of the directors at 31 December 2006 in the share capital of the company are shown below.

Convertible Common Common preference class class Common Scheme Class G class D A shares of C shares of shares of shares of shares of shares of Euro 0.01 Euro 0.01 Euro 0.01 Euro 0.01 Euro 0.01 Euro 0.01 2006 each each each each each each At 1 January 2006 D Andrews...... 1,785,714 1,785,715 3,000,000 — 44,444 — S Brenninkmeijer ...... ———62,500 —— A Browne...... ——125,500 125,000 3,333 — R Houghton...... ——150,000 125,000 3,333 — J Maret...... ————3,333 — J Robins...... ——17,500 62,500 —— At 31 December 2006 D Andrews...... 1,785,714 1,785,715 3,000,000 — 44,444 — S Brenninkmeijer ...... ———62,500 —— A Browne...... ——175,000 125,000 3,333 — R Houghton...... ——300,000 125,000 3,333 — J Maret...... ————3,333 90,000 J Robins...... ——37,500 62,500 —— Save as stated above, during the course of the year, no director, nor any member of their immediate family, had any other interest in the share capital of the company or any of its subsidiaries.

Directors’ share options The directors’ holdings of options over common shares in Xchanging B.V. during 2004 are as follows:

Number of options atDuring the year At Date from Grant 1 January 31 December Exercise which Expiry Director type 2004 Granted Exercised 2004 price exercisable date J Bramley...... (1) 12,500 ——12,500 136.0p 24/11/06 24/11/13 (1) 12,500 ——12,500 383.0p 24/11/06 24/11/13

(1) The Unapproved Share Option Plan The market price of the shares as at 31 December 2004 was £2.21 and the range during the year was £1.36–£2.21.

111 XCHANGING B.V. Notes to the financial information (Continued)

The directors’ holdings of options over common shares in Xchanging B.V. during 2005 are as follows:

Number of options at 1 January 2005 or atDuring the year At Date from Grant date of 31 December Exercise which Expiry Director type appointment Granted Exercised 2005 price exercisable date J Bramley...... (1) 12,500 ——12,500 136.0p 24/11/06 24/11/13 (1) 12,500 ——12,500 383.0p 24/11/06 24/11/13 S Brenninkmeijer(3)...... (1) 12,500 ——12,500 136.0p 24/11/06 24/11/13 (1) 12,500 ——12,500 383.0p 24/11/06 24/11/13 A Browne(3) ...... (2) 21,295 ——21,295 136.0p 24/11/06 24/11/13 (1) 49,500 ——49,500 207.0p 19/12/04 19/12/11 (1) 78,705 ——78,705 136.0p 24/11/06 24/11/13 (1) 100,000 ——100,000 383.0p 24/11/06 24/11/13 R Houghton(4) ...... (2) 500 —— 500 207.0p 19/12/04 19/12/11 (2) 21,295 ——21,295 136.0p 24/11/06 24/11/13 (1) 149,500 ——149,500 207.0p 19/12/04 19/12/11 (1) 103,705 ——103,705 136.0p 24/11/06 24/11/13 (1) 125,000 ——125,000 383.0p 24/11/06 24/11/13 J Maret(3) ...... (1) 62,500 ——62,500 383.0p 17/08/07 17/08/14 (1) 5,000 ——5,000 383.0p 13/12/07 13/12/14 (1) 50,000 ——50,000 383.0p 27/04/08 27/04/08 J Robins(3)...... (1) 45,000 ——45,000 61.0p 25/07/03 25/07/10 (1) 12,500 ——12,500 136.0p 24/11/06 24/11/13 (1) 12,500 ——12,500 383.0p 24/11/06 24/11/13

(1) The Unapproved Share Option Plan (2) The Approved Share Option Plan (3) At date of appointment – 18 October 2005 (4) At date of appointment – 23 February 2005

The market price of the shares as at 31 December 2005 was £2.75 and the range during the year was £2.21–£2.75.

112 XCHANGING B.V. Notes to the financial information (Continued)

The directors’ holdings of options over common shares in Xchanging B.V. during 2006 are as follows:

Number of options at At 1 January 31 December 2006 or atDuring the year 2006 or date Date from Grant date of of Exercise which Expiry Director type appointment Granted Exercised resignation price exercisable date J Bramley(3) ...... (1) 12,500 ——12,500 136.0p 24/11/06 24/11/13 (1) 12,500 ——12,500 383.0p 24/11/06 24/11/13 S Brenninkmeijer...... (1) 12,500 ——12,500 136.0p 24/11/06 24/11/13 (1) 12,500 ——12,500 383.0p 24/11/06 24/11/13 A Browne ...... (2) 21,295 ——21,295 136.0p 24/11/06 24/11/13 (1) 49,500 — (49,500) — 207.0p 19/12/04 19/12/11 (1) 78,705 ——78,705 136.0p 24/11/06 24/11/13 (1) 100,000 ——100,000 383.0p 24/11/06 24/11/13 R Houghton ...... (2) 500 — (500) — 207.0p 19/12/04 19/12/11 (2) 21,295 ——21,295 136.0p 24/11/06 24/11/13 (1) 149,500 — (149,500) — 207.0p 19/12/04 19/12/11 (1) 103,705 ——103,705 136.0p 24/11/06 24/11/13 (1) 125,000 ——125,000 383.0p 24/11/06 24/11/13 J Maret...... (1) 62,500 ——62,500 383.0p 17/08/07 17/08/14 (1) 5,000 ——5,000 383.0p 13/12/07 13/12/14 (1) 50,000 ——50,000 383.0p 27/04/08 27/04/08 D Millard(4)...... (1) 50,000 ——50,000 550.0p 11/04/09 11/04/16 N Rich(5) ...... (1) 50,000 ——50,000 530.0p 19/10/09 19/10/16 J Robins ...... (1) 45,000 — (20,000) 25,000 61.0p 25/07/03 25/07/10 (1) 12,500 ——12,500 136.0p 24/11/06 24/11/13 (1) 12,500 ——12,500 383.0p 24/11/06 24/11/13

(1) The Unapproved Share Option Plan (2) The Approved Share Option Plan (3) At date of resignation – 28 November 2006 (4) At date of appointment – 26 April 2006 (5) At date of appointment – 28 November 2006 The market price of the shares as at 31 December 2006 was £5.30 and the range during the year was £2.75–£5.30. A Browne and R Houghton exercised their share options when the market price of the shares was £3.75, resulting in a gain of £83,160 for A Browne and £252,000 for R Houghton. J Robins exercised 20,000 options when the market price of the shares was £5.30, resulting in a gain of £93,400.

113 XCHANGING B.V. Notes to the financial information (Continued)

11 Finance costs and income

2004 2005 2006 £’000 £’000 £’000 Finance costs: Imputed interest payable on shareholder loan and convertible loan note (note 24) ...... (1,226) (1,385) (1,053) Actual interest payable on shareholder loan and convertible loan note (note 24) ...... (166) (172) (56) Interest payable on bank securities ...... (115) —— Interest payable on bank loans and overdrafts...... (35) (45) (6) Interest cost on defined benefit pension schemes...... (5,242) (6,619) (6,765) Imputed interest on deferred consideration re acquisitions ——(256) Imputed interest on put option to acquire minority interest...... ——(174) Interest payable on finance leases...... (44) (35) (8) Other interest payable...... — (178) (33) Finance costs...... (6,828) (8,434) (8,351) Finance income: Bank interest...... 1,827 2,443 2,700 Expected return on plan assets – defined benefit pension schemes...... 4,728 5,702 6,268 Dividends received on available-for-sale assets ...... ——107 Other interest ...... ——39 Finance income ...... 6,555 8,145 9,114 Finance (costs)/income – net...... (273) (289) 763

12 Taxation

2004 2005 2006 £’000 £’000 £’000 Analysis of charge/(credit) in period Current tax...... 4,510 9,948 9,927 Deferred tax...... 1,162 1,339 (2,451) 5,672 11,287 7,476

Tax on items charged to equity

2004 2005 2006 £’000 £’000 £’000 Deferred tax on available-for-sale assets...... — 211 (316) Deferred tax on convertible debt...... 1,440 — (1,178) Deferred tax on put options...... ——910 Deferred tax on share options ...... ——(2,150) Deferred tax on pension ...... (944) (88) 2,280 496 123 (454)

114 XCHANGING B.V. Notes to the financial information (Continued)

Factors affecting the current tax charge for the year The above tax charges reconcile with the standard rate of corporation tax in the UK (30%) as follows:

2004 2005 2006 £’000 £’000 £’000 Profit on ordinary activities before tax ...... 16,060 33,898 24,920 Profit on ordinary activities multiplied by rate of corporation tax in the UK of 30% ...... 4,818 10,169 7,476 Taxable overseas dividend income...... — 605 1,110 Overseas losses not available for group relief ...... 243 143 827 Utilisation of tax losses ...... (39) (1,131) (2,069) Depreciation for the year in excess of capital allowances ... (184) (36) 181 Expenses not deductible for tax purposes: — Exceptional items...... 299 — 816 — Imputed interest on convertible loans...... 6 178 62 — Other expenses...... 240 1,131 1,029 Difference in deductibility of share options...... 62 110 (431) Non-taxable profit on disposal of group company...... (1,427) —— Short term temporary differences...... 223 (355) (688) Tax in respect of prior years...... 115 95 (390) Withholding tax written off ...... 28 —— Difference on foreign tax rates...... 563 378 (447) Deferred tax assets not recognised...... 725 —— Tax charge for the year ...... 5,672 11,287 7,476

Factors that may affect future tax charges Tax losses arising in previous years and other timing differences total an estimated carried forward amount of £18,967,000 (2005: £26,653,000) (2004: £27,840,000) which gives rise to an unrecognised deferred tax asset of £5,690,000 (2005: £7,996,000) (2004: £8,352,000), assuming a tax rate of 30% As the group undertaking in which these tax losses rest makes profits, future tax charges will be reduced as a result of the profits being offset by these tax losses. However no asset in relation to this has been recognised as there is insufficient certainty over the timing and availability of such future profits. The German tax authorities have commenced a tax audit of Xtb. No provision has been raised for any potential tax exposure that may arise from the investigation as it has not progressed sufficiently to make quantifying any potential exposures feasible at this stage.

115 XCHANGING B.V. Notes to the financial information (Continued)

The table below reconciles profit after taxation to XPAT, one of the group’s key performance indicators. It highlights the tax adjustments necessary to determine XPAT, which is a measure of the adjusted profit attributable to equity shareholders of the Group.

2004 2005 2006 £’000 £’000 £’000 Profit after taxation ...... 10,388 22,611 17,444 Add back: — Exceptional expenses (note 7) ...... 6,931 — 6,906 — Exceptional profit (note 35)...... (4,758) —— — Amortisation of intangible assets previously unrecognised by an acquired entity (note 15)...... 306 318 729 — Share based payments (note 27a) ...... 205 368 495 — Imputed interest on loan notes (note 11)...... 1,226 1,385 1,053 — Imputed interest on put options (note 11) ...... ——174 Tax effect of addbacks — Exceptional items...... (1,781) — (1,257) — Exceptional profit ...... ——— — Amortisation of intangible assets previously unrecognised by an acquired entity...... (92) (95) (219) — Share based payments...... ——(579) — Imputed interest on loan notes ...... (361) (238) (254) — Imputed interest on put options...... ——(52)

Adjusted profit after taxation...... 12,064 24,349 24,440 Adjusted profit after taxation attributable to minority interests ...... (5,939) (10,771) (7,301) XPAT...... 6,125 13,578 17,139

Tax on the addbacks is charged at 30% unless otherwise stated within factors affecting the current tax charge for the year.

13 Earnings per share Basic Basic earnings per share is calculated by dividing the net profit attributable to equity holders of Xchanging B.V. by the number of ordinary shares of Xchanging plc, taking into account the restructuring of the Company’s share capital on the date of the Global Offer (note 2a).

Diluted Diluted earnings per share is calculated by dividing the above net profit attributable to equity holders of Xchanging B.V. by the sum of the above Xchanging plc shares (taking the restructuring of the Company’s share capital into account) and the weighted number of potential dilutive Xchanging plc

116 XCHANGING B.V. Notes to the financial information (Continued) shares outstanding at the date of the Global Offer. These potential dilutive shares all relate to outstanding share options.

Number of Per share Earnings shares amount £’000 thousands pence Basic earnings per share: — 2004...... 4,976 205,578 2.4 — 2005...... 11,840 205,578 5.8 — 2006...... 10,718 205,578 5.2 Diluted earnings per share: — 2004...... 4,976 218,689 2.3 — 2005...... 11,840 218,689 5.4 — 2006...... 10,718 218,689 4.9 The following compares the share data used in the basic and diluted earnings per share calculations:

Number thousands Number of ordinary Xchanging plc shares for basic and headline earnings per share... 205,578 Dilutive potential ordinary shares: — Employee share options...... 13,110 Weighted average number of ordinary Xchanging plc shares for diluted earnings per share...... 218,689

In addition to the above, adjusted earnings per share is disclosed to provide a better understanding of the underlying trading performance of the group:

Number of Per share Earnings shares amount £’000 thousands pence Basic adjusted earnings per share: — 2004...... 6,125 205,578 3.0 — 2005...... 13,578 205,578 6.6 — 2006...... 17,139 205,578 8.3 Diluted adjusted earnings per share: — 2004...... 6,125 218,689 2.8 — 2005...... 13,578 218,689 6.2 — 2006...... 17,139 218,689 7.8 The adjusted earnings per share figures are calculated based on the Xchanging adjusted profit after tax (XPAT) as calculated in note 12 divided by the above basic and diluted number of shares outstanding at the date of the Global Offer.

117 XCHANGING B.V. Notes to the financial information (Continued)

14 Goodwill 2004 2005 2006 £’000 £’000 £’000 Cost At 1 January ...... 3,942 21,132 21,132 Additions (note 35)...... 17,190 — 8,230 At 31 December...... 21,132 21,132 29,362

Aggregate impairment At 1 January and at 31 December ...... ———

Net book amount At 31 December...... 21,132 21,132 29,362

At the end of each year the acquired goodwill in respect of all previous acquisitions is tested for impairment in accordance with IAS 36. Following the impairment test, it was not considered necessary to recognise an impairment charge for any of the years. Goodwill is allocated to the group’s cash-generating units (CGUs) identified according to enterprise partnership and business sector. The carrying amounts of goodwill by division are as follows:

Financial Business Insurance Markets Lines Other Total Ins-sure Holdings Limited ...... 3,942 ———3,942 RebusIS ...... ———16,920 16,920 Xtb ...... — 270 ——270 Landmark Business Consulting Limited ...... 3,263 ———3,263 Ferguson Snell and Associates Limited ...... ——4,938 — 4,938 Xchanging Broking Services Limited ...... 29 ———29 7,234 270 4,938 16,920 29,362

The recoverable amount of a CGU is determined based on value in use calculations. These calculations use cash flow projections based on budgets approved by management covering a three year period. Cash flows beyond the three year period are extrapolated using the estimated growth rates stated below. Key assumptions used for value in use calculations:

Financial Business Insurance Markets Lines Other Growth rate (post year 3)...... 0.0% 0.0% 0.0% 0.0% Discount rate ...... 18.0% 24.0% 18.0% 23.0%

The budgeted turnover values used for the first three years of the value in use calculations incorporate growth rates specific to that CGU. A zero growth rate was assumed for all years post the third year. The discount rates used are pre-tax and reflect specific risks relating to the relevant business sector.

118 XCHANGING B.V. Notes to the financial information (Continued)

15 Intangible assets Customer Assets in the Development contractual course of costs Software relationship development Total £’000 £’000 £’000 £’000 £’000 Cost At 1 January 2004...... 8,243 14,630 — 286 23,159 Acquisitions...... — 959 1,614 — 2,573 Additions – external...... — 191 ——191 Additions – internally generated...... 2,038 2,557 — 998 5,593 Disposals...... (73) (163) ——(236) Exchange adjustments ...... — 102 ——102 At 31 December 2004...... 10,208 18,276 1,614 1,284 31,382

Amortisation At 1 January 2004...... 1,473 4,900 ——6,373 Charge for the year ...... 964 3,355 306 — 4,625 Disposals...... (19) (92) ——(111) Impairment loss...... — 1,506 ——1,506 Exchange adjustments ...... — 70 ——70 At 31 December 2004...... 2,418 9,739 306 — 12,463

Net book amount At 31 December 2004...... 7,790 8,537 1,308 1,284 18,919

Customer Assets in the Development contractual course of costs Software relationship development Total £’000 £’000 £’000 £’000 £’000 Cost At 1 January 2005...... 10,208 18,276 1,614 1,284 31,382 Additions – internally generated...... 2,444 10,629 — 2,436 15,509 Transfers...... — 580 — (580) — Disposals...... — (3,428) ——(3,428) Written off to income statement ...... — (55) ——(55) Exchange adjustments ...... — 9 —— 9 At 31 December 2005...... 12,652 26,011 1,614 3,140 43,417

Amortisation At 1 January 2005...... 2,418 9,739 306 — 12,463 Charge for the year ...... 1,163 3,651 318 — 5,132 Disposals...... — (2,479) ——(2,479) Exchange adjustments ...... — (31) ——(31) At 31 December 2005...... 3,581 10,880 624 — 15,085

Net book amount At 31 December 2005...... 9,071 15,131 990 3,140 28,332

119 XCHANGING B.V. Notes to the financial information (Continued)

Customer Assets in the Development contractual course of costs Software relationship development Total £’000 £’000 £’000 £’000 £’000 Cost At 1 January 2006...... 12,652 26,011 1,614 3,140 43,417 Acquisitions...... ——864 — 864 Additions – internally generated...... 779 1,270 ——2,049 Additions – external...... 307 3,853 — 818 4,978 Transfers from tangibles...... — 213 ——213 Transfers to/(from) assets in the course of development ... — 2,502 — (2,502) — Disposals...... (501) (236) ——(737) Exchange adjustments ...... — (233) ——(233) At 31 December 2006...... 13,237 33,380 2,478 1,456 50,551

Amortisation At 1 January 2006...... 3,581 10,880 624 — 15,085 Charge for the year ...... 1,227 5,585 729 — 7,541 Transfers...... — 81 ——81 Disposals...... (327) (235) ——(562) Exchange adjustments ...... (1) (64) ——(65) At 31 December 2006...... 4,480 16,247 1,353 — 22,080

Net book amount At 31 December 2006...... 8,757 17,133 1,125 1,456 28,471

Amortisation has been charged through cost of sales and administrative expenses in the income statement as follows: 2004 2005 2006 £’000 £’000 £’000 Cost of sales...... 1,713 2,001 4,243 Administrative expenses...... 2,912 3,131 3,298 4,625 5,132 7,541

120 XCHANGING B.V. Notes to the financial information (Continued)

16 Property, plant and equipment

Leasehold Computer Motor Fixtures and improvements equipment vehicles fittings Total £’000 £’000 £’000 £’000 £’000 Cost At 1 January 2004...... 1,797 5,901 268 1,687 9,653 Acquisitions ...... 1,190 1,952 119 846 4,107 Additions...... 2,819 3,373 85 688 6,965 Disposals ...... (1,693) (33) (189) (272) (2,187) Exchange adjustments...... 33 236 (3) 131 397 At 31 December 2004 ...... 4,146 11,429 280 3,080 18,935

Depreciation At 1 January 2004...... 1,059 3,880 164 981 6,084 Charge for year...... 344 2,553 94 549 3,540 Disposals ...... (772) (21) (138) (173) (1,104) Exchange adjustments...... 11 208 (1) 91 309 At 31 December 2004 ...... 642 6,620 119 1,448 8,829

Net book value At 31 December 2004 ...... 3,504 4,809 161 1,632 10,106

Leasehold Computer Motor Fixtures and improvements equipment vehicles fittings Total £’000 £’000 £’000 £’000 £’000 Cost At 1 January 2005...... 4,146 11,429 280 3,080 18,935 Additions...... 1,434 3,842 66 364 5,706 Disposals ...... (9) (727) (93) (307) (1,136) Exchange adjustments...... (22) (146) 3 15 (150) At 31 December 2005 ...... 5,549 14,398 256 3,152 23,355

Depreciation At 1 January 2005...... 642 6,620 119 1,448 8,829 Charge for year...... 419 2,617 77 812 3,925 Disposals ...... (5) (472) (79) (280) (836) Exchange adjustments...... (3) (122) 3 23 (99) At 31 December 2005 ...... 1,053 8,643 120 2,003 11,819

Net book value At 31 December 2005 ...... 4,496 5,755 136 1,149 11,536

121 XCHANGING B.V. Notes to the financial information (Continued)

Leasehold Computer Motor Fixtures and improvements equipment vehicles fittings Total £’000 £’000 £’000 £’000 £’000 Cost At 1 January 2006...... 5,549 14,398 256 3,152 23,355 Acquisitions ...... 8 15 106 11 140 Transfers...... — (604) — 604 — Additions...... 2,202 3,382 — 3,123 8,707 Transfer to intangibles...... — (213) ——(213) Disposals ...... (104) (2,691) (165) (199) (3,159) Exchange adjustments...... (48) (209) (5) (88) (350) At 31 December 2006 ...... 7,607 14,078 192 6,603 28,480

Depreciation At 1 January 2006...... 1,053 8,643 120 2,003 11,819 Transfers...... — (306) — 306 — Charge for year...... 706 3,121 71 836 4,734 Transfers to intangibles...... — (81) ——(81) Disposals ...... (104) (2,606) (60) (144) (2,914) Exchange adjustments...... 25 (158) (4) (37) (174) At 31 December 2006 ...... 1,680 8,613 127 2,964 13,384

Net book value At 31 December 2006 ...... 5,927 5,465 65 3,639 15,096

Depreciation has been charged through cost of sales and administrative expenses in the income statement as follows: 2004 2005 2006 £’000 £’000 £’000 Cost of sales...... 3,257 3,549 3,951 Administrative expenses...... 283 376 783 3,540 3,925 4,734

Included in property, plant and equipment are fixtures and fittings held under finance leases with a net book value of £271,000 (2005: £416,000) (2004: £522,000).

17 Available-for-sale financial assets 2004 2005 2006 £’000 £’000 £’000 At 1 January ...... ——22,249 Additions ...... — 21,799 — Exchange differences ...... — 271 (338) Revaluation surplus/(deficit)...... — 179 (1,470) At 31 December...... — 22,249 20,441 Non current ...... — 22,249 20,441

These investments are held at fair value. There were no disposals or impairment provisions on available-for-sale financial assets during 2005 or 2006.

122 XCHANGING B.V. Notes to the financial information (Continued)

Available-for-sale financial assets include the following: 2004 2005 2006 £’000 £’000 £’000 Listed equity securities – Eurozone ...... — 6,242 5,546 Listed debt security...... — 16,007 14,895 — 22,249 20,441

The underlying currency of the above investments is Euros.

18 Trade and other receivables 2004 2005 2006 £’000 £’000 £’000 Due within one year: Trade receivables – non related parties ...... 15,388 25,070 29,430 Trade receivables – related parties (note 38)...... 9,047 11,985 7,872 Trade receivables...... 24,435 37,055 37,302 Less: provision for impairment of receivables ...... (973) (1,642) (1,003) Net trade receivables...... 23,462 35,413 36,299 Amounts owed by related parties (note 38) ...... 399 39 — Taxes receivable...... 1,450 393 536 Other receivables ...... 3,418 8,759 10,788 Prepayments and accrued income ...... 19,335 19,050 26,145 Pre-contract costs (see note below)...... 508 801 1,208 48,572 64,455 74,976

2004 2005 2006 £’000 £’000 £’000 Due after more than one year: Pre-contract costs (see note below)...... 3,871 3,901 5,826 Other receivables ...... 230 230 289 4,101 4,131 6,115

Pre-contract costs 2004 2005 2006 £’000 £’000 £’000 Written down value at 1 January...... 1,896 4,379 4,702 Pre-contracts costs deferred in year ...... 2,899 1,007 3,223 4,795 5,386 7,925 Amortisation charge for the year ...... (416) (684) (881) Write-offs in the year ...... ——(10) Written down value at 31 December ...... 4,379 4,702 7,034

Included in amounts owed by related parties in 2004 were loans to R Houghton and A Browne, directors of the company. The loans were made prior to their appointments to the Board, carried a coupon of 5% per annum and were secured over their shareholdings in the company. These loans were repaid during 2005. The amounts outstanding were: 2004 2005 2006 £’000 £’000 £’000 A Browne ...... 96,320 —— R Houghton...... 115,569 ——

123 XCHANGING B.V. Notes to the financial information (Continued)

The following table sets out the age of financial assets that are past due but not impaired: 2006 £’000 Current ...... 20,293 Past due: 1–30 days ...... 8,416 31–60 days ...... 2,669 61–90 days ...... 2,458 >90 days...... 2,463 Net trade receivables...... 36,299

19 Cash and cash equivalents 2004 2005 2006 £’000 £’000 £’000 Cash at bank and in hand...... 78,872 70,328 58,684

Within the balance shown above, there is £5,000,000 cash held in respect of the collaterisation for a letter of credit provided for the Xtb acquisition (2005: £5,000,000) (2004: £5,000,000). The letter of credit is provided by Lloyds TSB for 3 years from signing the contract and underwrites the savings guarantees that are being made by Xchanging to Deutsche Bank in respect of the acquisition of Xtb. Upon Xtb failing to deliver the guaranteed savings, Deutsche Bank may call for an amount of up to Euros 15m. This letter of credit expires on 30 June 2007. The cash reflected on the group’s balance sheet includes cash immediately accessible for operations but also includes cash held within the enterprise partnerships, which is paid to the group on an annual, or in some cases quarterly, basis as contractual dividends and licence fees. Therefore cash available for the group’s 100% owned operations is dependent on the periodic distributions from the enterprise partnerships, all of whom have a 100% distribution policy. 2004 2005 2006 £’000 £’000 £’000 Cash available for 100% owned operations ...... 15,358 18,275 24,091

20 Trade and other payables – current 2004 2005 2006 £’000 £’000 £’000 Trade payables – non related parties ...... 13,535 17,189 18,094 Trade payables – related parties (note 38)...... 4,587 6,027 2,360 Trade payables...... 18,122 23,216 20,454 Other taxation and social security ...... 4,590 5,129 7,481 Other payables – non related parties...... 2,153 4,378 9,256 Other payables – related parties (note 38) ...... — 1,165 6,880 Accruals and deferred income ...... 42,518 40,646 31,451 Accruals and deferred income – related parties (note 38).. ——4,133 Dividends payable to minority interests...... ——1,247 67,383 74,534 80,902

21 Current income tax liabilities 2004 2005 2006 £’000 £’000 £’000 Current income tax liabilities ...... 2,626 6,220 7,129

124 XCHANGING B.V. Notes to the financial information (Continued)

22 Financial liabilities – borrowings 2004 2005 2006 £’000 £’000 £’000 Current Bank loans and overdrafts due within one year on demand ...... 27 —— Shareholder loan ...... 10,192 10,363 — Obligations under finance leases ...... 186 281 17 Deferred consideration on acquisitions ...... ——3,253 10,405 10,644 3,270

Non current Convertible loan note...... 11,402 12,195 13,042 Obligations under finance leases ...... 192 108 — 11,594 12,303 13,042

In September 2003 the sterling shareholder loan of £5m was provided by General Atlantic Partners LLP to fund the international expansion plans of the group. It took the form of an interest bearing convertible loan note at 1.71%, with interest rolling up into the principal. In January 2004 this was rolled over into a note with the same properties and an additional £5m was advanced by General Atlantic Partners LLP at this time. The loan note was exchanged for 1,895,020 convertible preference class E shares in May 2006 at a price of £5.50 per share, which was considered to be the fair market value of the shares at the time. The equity elements of the shareholder loan were transferred to the share premium reserve on exchange. In January 2004 a sterling convertible loan note was issued to Rebus Insurance Services Holdings Limited, and was subsequently transferred to General Atlantic Partners LLP, on the acquisition of the RebusIS group. The face value of the loan note is £15m on its maturity date of 28 January 2009 and is recorded in the balance sheet at its fair value, having been discounted at the market rate on the date of issue. Before maturity the loan note can be converted into convertible preference class C shares at a price of £11 per share and is secured over such shares. The loan note is not interest bearing. The equity element of £355,000 recognised on inception was transferred to equity reserves in 2004. The effective interest rates, being market rate at the time the loans were entered into, are as follows:

Shareholder loan ...... 7.63% Convertible loan note ...... 6.95%

All borrowings are denominated in sterling.

23 Other non-current liabilities 2004 2005 2006 £’000 £’000 £’000 Trade and other payables...... 8,927 8,094 9,764 Deferred income tax liabilities (note 26) ...... 1,745 2,281 2,517 10,672 10,375 12,281

24 Financial instruments Fair values of non-derivative financial assets and financial liabilities The carrying amounts of all current financial instruments approximate to their fair value.

125 XCHANGING B.V. Notes to the financial information (Continued)

The carrying amounts and fair values of the non-current financial liabilities are as follows:

Carrying amount Fair value 2004 2005 2006 2004 2005 2006 £’000 £’000 £’000 £’000 £’000 £’000 Convertible loan note...... 11,402 12,195 13,042 11,402 12,195 12,915 Put option to acquire minority interest...... ——7,140 ——7,140 11,402 12,195 20,182 11,402 12,195 20,055

The group has minority shareholders in two enterprise partnerships that hold the right to sell their shares to the group at a future date. In accordance with IAS 32 the cash flows associated with these options are fair valued and discounted back to their present value. This notional liability is recognised in the balance sheet, the other side of the entry going to reserves (note 31). Fair values of the above are calculated by taking the future cash flows associated with the instruments and discounting them back to their present value using interest rates based on current market rates.

Maturity of non-current financial liabilities The maturity profile of the group’s non-current liabilities, at 31 December was as follows: 2004 2005 2006 £’000 £’000 £’000 In more than one year but not more than two years ...... ——— In more than two years but not more than five years...... 15,000 15,000 25,000 In more than five years...... ——— 15,000 15,000 25,000

Finance lease payments The minimum lease payments under finance leases fall due as follows:

2004 2005 2006 £’000 £’000 £’000 Not later than one year...... 181 281 17 Later than one year but not more than five years...... 197 108 — More than five years...... ——— 378 389 17

126 XCHANGING B.V. Notes to the financial information (Continued)

25 Provisions

Operational Restructuring Property risk Other Total £’000 £’000 £’000 £’000 £’000 At 1 January 2004...... 1,166 127 ——1,293 Acquired in the year...... ——12,605 12,834 25,439 Released in the year...... ——(650) (44) (694) Provided in the year ...... — 3,853 628 2,258 6,739 Utilised in the year...... (1,166) (127) (3,779) (3,212) (8,284) Exchange adjustments ...... ——(104) 11 (93) At 31 December 2004 ...... — 3,853 8,700 11,847 24,400 Released in the year...... — (173) (387) (108) (668) Provided in the year ...... — 579 1,039 12,551 14,169 Utilised in the year...... — (2,188) (4,345) (6,640) (13,173) Exchange adjustments ...... ——(267) (296) (563) At 31 December 2005 ...... — 2,071 4,740 17,354 24,165 Released in the year...... ——(1,426) (1,336) (2,762) Provided in the year ...... 1,866 833 1,238 1,859 5,796 Utilised in the year...... — (834) (2,022) (5,363) (8,219) Exchange adjustments ...... — (7) (76) (312) (395) Other movements...... — 180 — (598) (418) At 31 December 2006 ...... 1,866 2,243 2,454 11,604 18,167

Provisions have been analysed between current and non-current as follows: 2004 2005 2006 £’000 £’000 £’000 Current ...... 6,147 8,395 8,720 Non-current...... 18,253 15,770 9,447 24,400 24,165 18,167

The restructuring provision relates to management redundancies as a result of the strategic realignment of various aspects of the business in order to increase productivity and reduce costs. The property provision relates to dilapidations on the withdrawal from a number of operating leases and a provision to cover the shortfall in vacant properties between expected sub-letting rents and the cost of two onerous operating leases. The leases provided for have 5 and 9 years left to run. The operational risk provision comprises an estimated liability in respect of identified operating errors which had occurred in the ordinary course of business in the Financial Markets division up to 31 December 2006. The other provision includes provisions for early retirement, severance and long service payments, other personnel related provisions, being provisions for profit sharing, gratuities and leave encashment, and a VAT provision due to a change in regulations.

26 Deferred tax Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 30% for differences arising in the UK and 40.86% for those arising in Germany.

127 XCHANGING B.V. Notes to the financial information (Continued)

The movements in deferred tax assets and liabilities (prior to the offsetting of balances within the same jurisdiction as permitted by IAS 12 during the period) are shown below: 2004 2005 2006 £’000 £’000 £’000 Assets At 1 January ...... 1,994 14,534 13,508 Recognised on business combination ...... 12,893 — 25 Profit and loss (charge)/credit...... (1,708) (1,015) 2,486 Exchange differences ...... 411 (99) (118) Tax credited to equity...... 944 88 416 At 31 December...... 14,534 13,508 16,317

2004 2005 2006 £’000 £’000 £’000 Liabilities At 1 January ...... (37) (1,745) (2,281) Recognised on business combination ...... (795) — (259) Profit and loss credit/(charge)...... 546 (324) (35) Exchange differences ...... (19) (1) 20 Tax (charged)/credited to equity...... (1,440) (211) 38 At 31 December...... (1,745) (2,281) (2,517)

The group has recognised all deferred tax assets in 2006, with the exception of deferred tax assets arising in one subsidiary company, which has been loss making in the past. The unrecognised deferred tax assets for this company amount to £4,874,000 in respect of tax losses carried forward (2005: £7,093,000) (2004: £7,566,000) and £816,000 in respect of accelerated capital allowances (capital allowances in excess of depreciation) and other temporary differences (2005: £903,000) (2004: £786,000). These assets have not been recognised due to the uncertainty of future suitable taxable profits within this company. In addition, in 2004 deferred tax assets of £70,000 for accelerated capital allowances (capital allowances in excess of depreciation) and other temporary differences were not recognised in other group companies.

Unrecognised deferred tax assets

2004 2005 2006 £’000 £’000 £’000 Tax losses carried forward...... 7,566 7,093 4,874 Other timing differences ...... 63 6 5 Accelerated capital allowances...... 793 897 811 8,422 7,996 5,690

Deferred tax assets and liabilities are only offset where there is a legal right of offset and there is intention to settle the balance net.

128 XCHANGING B.V. Notes to the financial information (Continued)

Deferred tax assets Accelerated Tax tax Share Convertible Pension losses depreciation options debt Other Total £’000 £’000 £’000 £’000 £’000 £’000 £’000 At 1 January 2004 ...... 1,583 — 274 ——137 1,994 Recognised on business combinations ...... 8,856 1,577 298 ——2,162 12,893 (Charged)/credited to income statement ...... (233) (255) 607 ——(1,827) (1,708) Credited to equity ...... 944 —————944 Exchange rate adjustments .. 177 ————234 411 At 31 December 2004...... 11,327 1,322 1,179 ——706 14,534 Credited/(charged) to income statement ...... 1,105 (1,214) (323) ——(583) (1,015) Credited to equity ...... 88 —————88 Exchange rate adjustments .. (79) ————(20) (99) At 31 December 2005...... 12,441 108 856 ——103 13,508 Recognised on business combinations ...... —— —— —25 25 Credited/(charged) to income statement ...... 723 1,478 (154) 280 254 (95) 2,486 (Charged)/credited to equity...... (2,280) ——2,150 443 103 416 Exchange rate adjustments .. (23) ————(95) (118) At 31 December 2006...... 10,861 1,586 702 2,430 697 41 16,317

Deferred tax liabilities Accelerated Convertible tax debt depreciation Put option Other Total £’000 £’000 £’000 £’000 £’000 At 1 January 2004...... — 37 ——37 Recognised on business combination...... — 795 ——795 Credited to income statement.. (361) (185) ——(546) Charged to equity ...... 1,440 ———1,440 Exchange rate adjustments ...... — 19 ——19

At 31 December 2004...... 1,079 666 ——1,745 (Credited)/charged to income statement ...... (238) 562 ——324 Charged to equity ...... ———211 211 Exchange rate adjustments ...... — (1) — 21 At 31 December 2005...... 841 1,227 — 213 2,281 Recognised on business combination...... — 259 ——259 Charged/(credited) to income statement ...... — 34 (52) 53 35 (Credited)/charged to equity .... (735) — 910 (213) (38) Exchange rate adjustments ...... — (20) ——(20) At 31 December 2006...... 106 1,500 858 53 2,517

129 XCHANGING B.V. Notes to the financial information (Continued)

The deferred income tax charged/(credited) to equity during the year is as follows:

2004 2005 2006 £’000 £’000 £’000 Fair value reserves in shareholders’ equity: — available-for-sale financial assets...... — 211 (316) — put option ...... ——910 — convertible debt ...... 1,440 — (1,178) — share option...... ——(2,150) — actuarial movements on retirement benefit obligations.. (944) (88) 2,280 496 123 (454)

27 Called up share capital

2004 2005 2006 £’000 £’000 £’000 Authorised All shares nominal value 0.01 Euro 19,600,000 convertible preference class A shares (2005 & 2004: 19,500,000) ...... 109 109 110 4,826,255 convertible preference class B shares ...... 28 28 28 20,000,000 convertible preference class C shares ...... 128 128 128 1,818,181 convertible preference class D shares (2004: nil) — 13 13 2,000,000 convertible preference class E shares (2005 & 2004: nil)...... ——14 1,785,714 common class A shares...... 10 10 10 Nil common class B shares (2005 & 2004: 1,785,714)...... 10 10 — 1,785,715 common class C shares...... 10 10 10 53,581,245 common shares...... 307 307 307 2,937,500 scheme shares A ...... 16 16 16 126,000 scheme shares B...... 1 1 1 100,000 class G shares...... 1 1 1 620 633 638

Share movements – 2004

Number of Number of Total shares at shares at nominal Allotted, called up and fully paid 1 January Issued Redeemed 31 December value £’000 All shares nominal value 0.01 Euro Convertible preference class A shares... 19,031,250 ——19,031,250 106 Convertible preference class B shares... 4,826,255 ——4,826,255 28 Common class A shares ...... 1,785,714 ——1,785,714 10 Common class B shares...... 1,785,714 ——1,785,714 10 Common class C shares...... 1,785,715 ——1,785,715 10 Common shares ...... 3,836,681 262,612 — 4,099,293 24 Scheme shares A ...... 937,500 ——937,500 5 Scheme shares B...... 126,000 ——126,000 1 Class G shares...... 84,440 ——84,440 1 195

130 XCHANGING B.V. Notes to the financial information (Continued)

Share movements – 2005

Number of Number of Total shares at shares at nominal Allotted, called up and fully paid 1 January Issued Redeemed 31 December value £’000 All shares nominal value 0.01 Euro Convertible preference class A shares ... 19,031,250 ——19,031,250 106 Convertible preference class B shares.... 4,826,255 ——4,826,255 28 Convertible preference class D shares ... — 1,818,181 — 1,818,181 13 Common class A shares ...... 1,785,714 ——1,785,714 10 Common class B shares...... 1,785,714 — (1,785,714) —— Common class C shares...... 1,785,715 ——1,785,715 10 Common shares ...... 4,099,293 145,788 — 4,245,081 25 Scheme shares A ...... 937,500 ——937,500 5 Scheme shares B ...... 126,000 ——126,000 1 Class G shares ...... 84,440 207 — 84,647 1 199

Share movements – 2006 Number of Number of Total shares at shares at nominal Allotted, called up and fully paid 1 January Issued Redeemed 31 December value £’000 All shares nominal value 0.01 Euro Convertible preference class A shares...... 19,031,250 568,750 — 19,600,000 110 Convertible preference class B shares ...... 4,826,255 ——4,826,255 28 Convertible preference class D shares...... 1,818,181 ——1,818,181 13 Convertible preference class E shares...... — 1,895,020 — 1,895,020 13 Common class A shares...... 1,785,714 ——1,785,714 10 Common class C shares...... 1,785,715 ——1,785,715 10 Common shares ...... 4,245,081 655,404 — 4,900,485 30 Scheme shares A...... 937,500 ——937,500 5 Scheme shares B...... 126,000 ——126,000 1 Class G shares...... 84,647 — (11,110) 73,537 1 221

Voting rights All classes of shares carry equal voting rights.

Dividend rights Convertible preference class A, B, C, D and E shares, common shares and scheme shares A and B carry equal dividend rights. Common class A and C shares gain the same dividend rights on the achievement of milestones based on the market capitalisation of the company. Class G shares are treated for the purposes of the allocation of interim and final dividends as if they had identical rights to those attaching to such number of common shares to which they have equivalent rights (not to exceed 5.5 million common shares) at the time of the distribution as is calculated using the procedure set out in article 4b of the company’s articles of association.

Rights on liquidation or winding up Convertible preference class A, B, C, D and E shares have a preferential right over all classes of common share and class G shares on liquidation or winding up to the return of the nominal amount plus any premium paid, and then an equal right with common shares and scheme shares A and B (following completion of their three year probationary period) to the remaining assets. Class G shares

131 XCHANGING B.V. Notes to the financial information (Continued)

are only entitled to participate in the remaining assets as if they had identical rights to those attaching to such number of common shares (not to exceed 5.5 million common shares) to which they have equivalent rights as at the date of dissolution of the company as is calculated using the procedure set out in article 4b of the company’s articles of association. Common class A and C shares are only entitled to participate in the remaining assets equally with common shares on achievement of the market capitalisation milestones referred to above.

Conversion rights Convertible preference class A, B, C, D and E shares are convertible to an equal number of common shares by resolution of the Board of the company.

Share options The company operates a number of employee share option plans. The number of shares subject to options, the periods in which they were granted and the periods in which they may be exercised are given below:

Approved options Unapproved options G Share options Number WAEP* Number WAEP* Number WAEP* (pence) (pence) (pence) At 1 January 2004 Options outstanding ...... 1,004,585 175.01 3,015,943 252.88 —— Options granted ...... 538,650 354.66 732,850 382.78 20,656 3,426.07 Options exercised ...... (222,937) 80.89 (39,675) 208.96 —— Options forfeited ...... (118,320) 218.48 (121,603) 246.51 —— At 31 December 2004 Options outstanding ...... 1,201,978 243.33 3,587,515 280.12 20,656 3,426.07 Movements during 2005 Options granted ...... ——832,500 378.74 —— Options exercised ...... (145,788) 124.01 ——(207) 7,401.60 Options forfeited ...... (95,991) 274.61 (225,471) 275.26 (593) 2,134.89 At 31 December 2005 Options outstanding ...... 960,199 290.86 4,194,544 299.95 19,856 3,423.18 Movements during 2006 Options granted ...... 106,786 383.02 185,714 467.60 —— Options exercised ...... (85,597) 269.44 (569,807) 215.78 —— Options forfeited ...... (80,434) 349.48 (329,018) 279.93 (533) 7,401.60 At 31 December 2006 Options outstanding ...... 900,954 298.58 3,481,433 325.59 19,323 3,313.45 Range of exercise prices.. 27.16p 63.35p 2,134.81p ——— 386.56p 550p 7,401.60p Weighted average remaining contractual life...... 2,593 days 2,659 days 2,766 days Number of options exercisable at 31 December 2006...... 344,597 1,851,290 —

* Weighted average exercise price.

132 XCHANGING B.V. Notes to the financial information (Continued)

27a Share based payments Options are granted with a fixed exercise price at the date of the grant. The contractual life of an option is 10 years. Awards are granted to directors and employees on a merit basis. The company has made several grants per year since January 2000. Options granted become exercisable on the third anniversary of the date of grant. Exercise of an option is subject to continued employment. The group has no legal or constructive obligation to repurchase or settle the options in cash. Options were valued using the Black-Scholes pricing model. The fair value per option granted and the assumptions used in the calculations are as follows:

General assumptions

Vesting period (years)...... 3 Option life (years)...... 10 Expected life (years) ...... 3.25 Expected dividends expressed as a dividend yield (%) .... 0 Possibility of ceasing employment before vesting (%)...... 20 Risk free interest rate...... 3.1%–3.7%

Options over common shares

2004 2005 2006 Share price at grant date (pence) ...... 136–221 275 375–530 Weighted average exercise price (pence) — Approved options...... 354.66 — 383.02 — Unapproved options ...... 382.78 383.01 467.60 Weighted average fair value of options granted in the period (Euro) — Approved options...... 0.38 — 1.29 — Unapproved options ...... 0.41 0.80 1.25 Expected volatility (%)...... 44–45 34–41 26–30

Options over G shares

2004 2005 2006 Share price at grant date (pence) ...... 1,645–7,397 —— Weighted average exercise price (pence)...... 3,426.07 —— Weighted average fair value of options granted in the period (Euro)...... 13.57 —— Expected volatility (%)...... 42–45 ——

There were no grants of options over G shares during 2006 and 2005. The expected volatility is based on historical volatility over the last three years. The expected life is the average expected period to exercise. The risk free rate of return is the yield on zero-coupon Euro-zone government bonds of a term consistent with the assumed option life. A reconciliation of option movements over the year to 31 December 2006 is in note 27. The weighted average share price during the year for options exercised over the year was £3.97 per share for ordinary shares. No options over G shares were exercised. The total charge for 2006 relating to employee share based payments was £495,000, all of which related to equity-settled share based payment transactions (2005: £368,000) (2004: £205,000).

133 XCHANGING B.V. Notes to the financial information (Continued)

28 Retained earnings Note £’000 At 1 January 2004 ...... (33,085) Retained profit for the financial year...... 4,976 Value of employee service — share options...... 27a 205 At 31 December 2004 ...... (27,904) Retained profit for the financial year...... 11,840 Value of employee service — share options...... 27a 368 At 31 December 2005 ...... (15,696) Retained profit for the financial year...... 10,718 Value of employee service — share options...... 27a 495 Deferred tax on share options recognised early...... 12 2,150 Recognition of put option to acquire minority interest ...... 24 (6,966) Deferred tax on the put option ...... 12 (910) At 31 December 2006 ...... (10,209)

29 Share premium account 2004 2005 2006 £’000 £’000 £’000 At 1 January...... 58,390 58,671 68,163 Premium on shares issued during the year under the share option schemes ...... 281 195 1,606 Premium on shares issued during the year ...... — 9,787 1,480 Premium on exchange of convertible loan note into shares...... ——11,665 Premium on shares bought back by the company...... — (490) — Transactional costs of shares issued...... ——(325) At 31 December ...... 58,671 68,163 82,589

134 XCHANGING B.V. Notes to the financial information (Continued)

30 Other reserves Shares to Warrant Revaluation Translation Other be issued reserve reserve reserve reserves Total £’000 £’000 £’000 £’000 £’000 £’000 At 1 January 2004...... — 690 ——158 848 Actuarial loss on pensions...... ————(3,350) (3,350) Deferred tax on pensions taken to reserves...... ————950 950 Convertible debt – equity element...... ————894 894 Deferred tax on convertible debt . ————(1,440) (1,440) Exchange adjustments ...... ———402 — 402 At 31 December 2004 ...... — 690 — 402 (2,788) (1,696) Shares to be issued...... 794 ————794 Revaluation of investments...... ——(76) ——(76) Actuarial loss on pensions...... ————(863) (863) Deferred tax on pensions and revaluations taken to reserves... ——(107) — 276 169 Convertible debt – equity element...... ————594 594 Exchange adjustments ...... ———104 — 104 At 31 December 2005 ...... 794 690 (183) 506 (2,781) (974) Transfer to issued share capital .... (794) (690) ———(1,484) Revaluation of investments...... ——(1,091) ——(1,091) Actuarial gain on pensions ...... ————6,661 6,661 Deferred tax on pensions and revaluations taken to reserves... ——160 — (1,934) (1,774) Convertible debt – equity element...... ————206 206 Deferred tax on convertible debt . ————1,178 1,178 Exchange of convertible debt into shares...... ————(1,255) (1,255) Exchange adjustments ...... ———(216) — (216) At 31 December 2006 ...... ——(1,114) 290 2,075 1,251

The shares to be issued reserve and warrant reserve related to share warrants over preference shares issued as consideration for £690,000 in consulting services provided to Xchanging UK Limited, a subsidiary of the company. 568,750 shares were issued during 2006 in satisfaction of the warrants at a price of US$3.20 per share and amounts included within the warrant reserve and shares to be issued have been transferred to the share capital and share premium reserves. BAE Systems hold a warrant to subscribe for 664,754 shares in the common shares of the company at the price of US$3.20 per share. Contingent upon the occurrence of certain other events, the warrant includes a right for BAE Systems to subscribe for additional shares in common shares of the company so that its total holding would be 957,244 shares. BAE Systems also has dilution protection in that if any shares in the common shares of the company are issued to a third party, subject to certain defined exceptions, BAE Systems has the right to subscribe for such additional number of shares (at the same price as paid by the respective third party) in the common stock of the company so that its percentage share post issue of shares to the third party would be the same as it was pre issue of shares to the third party.

135 XCHANGING B.V. Notes to the financial information (Continued)

31 Movement in shareholders’ equity Share Share Other Retained Minority Note capital premium reserves earnings interests Total equity £’000 £’000 £’000 £’000 £’000 £’000 At 1 January 2004 ...... 194 58,390 848 (33,085) 9,522 35,869 Net profit ...... ———4,976 5,412 10,388 Minority interest on business combination ...... 32 ————4,853 4,853 Share options — proceeds from shares issued ...... 1 281 ———282 — value of employee services...... 27a ———205 — 205 Actuarial loss on pensions...... 36 ——(3,350) — (155) (3,505) Deferred tax on pensions taken to reserves...... 12 ——950 — (6) 944 Convertible debt – equity element... ——894 ——894 Deferred tax on convertible debt ..... 12 ——(1,440) ——(1,440) Exchange adjustments...... — 402 — 297 699 Dividends paid ...... ————(7,918) (7,918) At 31 December 2004 ...... 195 58,671 (1,696) (27,904) 12,005 41,271 Net profit ...... ———11,840 10,771 22,611 Revaluation of investments ...... 17 ——(76) — 255 179 Deferred tax on revaluation of investments ...... 12 ——(107) — (104) (211) Issue of share capital ...... 13 9,987 ———10,000 Transaction costs on issue of share capital ...... — (200) ———(200) Share options — proceeds from shares issued ...... 1 195 ———196 — value of employee services...... 27a ———368 — 368 Shares bought back by company ...... (10) (490) ———(500) Shares to be issued...... ——794 ——794 Actuarial gain/(loss) on pensions ..... 36 ——(863) — 683 (180) Deferred tax on pensions taken to reserves...... 12 ——276 — (188) 88 Convertible debt – equity element... ——594 ——594 Exchange adjustments...... ——104 — (97) 7 Dividends paid ...... ————(6,099) (6,099) At 31 December 2005 ...... 199 68,163 (974) (15,696) 17,226 68,918 Net profit ...... ———10,718 6,726 17,444 Revaluation of investments ...... 17 ——(1,091) — (379) (1,470) Deferred tax on revaluation of investments ...... 12 ——160 — 156 316 Minority interests on business combination ...... 32 ————21 21 Share options — proceeds from shares issued ...... 5 1,606 ———1,611 — value of employee services...... 27a ———495 — 495 Deferred tax on share options...... 11 ———2,150 — 2,150 Exercise of warrants...... 4 1,480 (1,484) ——— Actuarial gain on pensions...... 36 ——6,661 — 1,356 8,017 Deferred tax on pensions taken to reserves...... 12 ——(1,934) — (346) (2,280) Exchange of convertible debt into shares...... 13 11,665 (1,255) ——10,423 Put option recognition ...... 24 ———(6,966) — (6,966) Deferred tax on the put option...... 11 ———(910) — (910) Convertible debt – equity element... ——206 ——206 Deferred tax on convertible debt ..... 12 ——1,178 ——1,178 Exchange adjustments...... ——(216) — (144) (360) Transactional costs of shares issued. — (325) ———(325) Dividends paid ...... ————(12,838) (12,838) At 31 December 2006 ...... 221 82,589 1,251 (10,209) 11,778 85,630

136 XCHANGING B.V. Notes to the financial information (Continued)

32 Equity minority interests 2004 2005 2006 £’000 £’000 £’000 At 1 January ...... 9,522 12,005 17,226 Minority interests’ share of profit for year...... 5,412 10,771 6,726 Minority interests’ share of net (losses)/gains not recognised in income statement...... (161) 646 787 Exchange rate differences...... 297 (97) (144) Minority interest on business combination...... 4,853 — 21 Dividends payable to minority interests...... (7,918) (6,099) (12,838) At 31 December...... 12,005 17,226 11,778

The profits of the Xchanging group companies in which the minorities have an interest are not necessarily shared in proportion to the shareholding interest in that company as each of the above individual enterprise partnerships have a distinct contractual method of profit share.

33 Financial commitments At 31 December future aggregate minimum lease payments under non-cancellable operating leases were as follows:

2004 2005 2006 £’000 £’000 £’000 Operating leases: land and buildings Within one year...... 8,736 8,573 9,683 Later than one year and less than five years...... 31,903 31,665 34,230 Later than five years...... 49,978 42,319 34,489

2004 2005 2006 £’000 £’000 £’000 Operating leases: other Within one year...... 586 784 408 Later than one year and less than five years...... 596 497 204

The group’s most significant leases are that of the premises at Leadenhall Street, London and in Frankfurt. The London lease expires on 30 June 2021 and is subject to a rent review in July 2009 and again in 2014 and 2019. The Frankfurt lease expires in June 2013. The group is contractually obligated to invest amounts, on behalf of the enterprise partnerships it has acquired or set-up, in technology development and maintenance and in the development of new processes and systems. The total commitment outstanding at 31 December is presented below as analysed by the period in which the commitment falls due:

2004 2005 2006 £’000 £’000 £’000 Financial investment commitments Within one year...... 8,417 4,030 2,319 One to two years...... 3,209 8,424 8,809 Two to five years...... 17,635 8,424 13,574 29,261 20,878 24,702

137 XCHANGING B.V. Notes to the financial information (Continued)

34 Cash flow from operating activities Reconciliation of operating profit to cash generated from operating activities:

2004 2005 2006 £’000 £’000 £’000 Operating profit ...... 16,333 34,187 24,157 Adjustment for non-cash items: Employee share-based payment charges...... 205 368 495 Depreciation ...... 3,540 3,925 4,734 Loss on disposal of property, plant and equipment ...... 443 126 45 Profit on disposal of group company ...... (4,758) —— Impairment of fixed assets...... 1,506 —— Write-off of intangibles ...... — 55 10 Amortisation of intangibles ...... 4,625 5,132 7,541 Amortisation of pre-contract costs ...... 416 684 881 22,310 44,477 37,863 Changes in working capital (excluding effects of acquisitions) Increase in trade and other receivables...... (9,645) (15,590) (8,523) Increase in payables...... 9,437 6,329 5,477 (Decrease)/increase in pensions...... (1,038) (471) 909 Decrease in provisions...... (3,642) (235) (6,293) Cash generated from continuing operations...... 17,422 34,510 29,433

35 Business combinations (i) RebusIS group During 2004 the group acquired 100% of the equity of the RebusIS group, taking control from 1 January 2004. The group was acquired by Xpanse Limited, a subsidiary of Xchanging B.V. via the issue of a convertible loan note (see note 22). Details of the book value of the RebusIS group’s net assets acquired, fair value adjustments, consideration paid and the resulting goodwill and other intangibles, are set out below.

Accounting Other policy fair value Book value alignment adjustments Fair value £’000 £’000 £’000 £’000 Intangible assets ...... 767 (298) 1,614 2,083 Property, plant and equipment ...... 2,138 ——2,138 Trade and other receivables...... 15,022 ——15,022 Deferred income tax assets...... 6,066 — 515 6,581 Cash and cash equivalents ...... 833 — (524) 309 Current liabilities ...... (13,571) ——(13,571) Non-current liabilities...... (140) ——(140) Retirement benefit obligations...... (17,105) ——(17,105) Net liabilities assumed...... (5,990) (298) 1,605 (4,683) Goodwill (note 14) ...... 16,920 Costs of acquisition ...... (1,166) Settled by convertible loan note (note 22) ..... 11,071

The fair value and accounting policy adjustments were as follows: (i) A reduction to intangible assets of £298,000 in respect of alignment of depreciation and amortisation policies.

138 XCHANGING B.V. Notes to the financial information (Continued)

(ii) A fair value increase in the deferred tax asset arising from the recognition of deferred tax losses under IFRS 3. (iii) A fair value adjustment to cash representing adjustments made to the completion balance sheet. Goodwill represents the value of synergies and the collective work force. The fair value in respect of intangible assets recognised for the first time in accordance with IFRS 3 on the acquisition of RebusIS can be analysed as follows:

£’000 Contractual customer relationship – order book...... 1,614

Post exceptional costs of £5,425,000 for the RebusIS integration, the group’s profit for 2004 includes a £267,000 loss in respect of the RebusIS operations.

(ii) Xchanging Transaction Bank GmbH (formerly etb GmbH) With effect from 1 June 2004, the group entered into an enterprise partnership which resulted in a 51% interest in the equity of Xtb. The accounting treatment of this was a disposal of a 49% interest in Xchanging etb GmbH (previously a 100% owned subsidiary of the Xchanging group) in return for a 51% interest in Xtb. The unrealised gain on disposal of the 49% interest was £4.8 million and has been recognised as an exceptional item in the income statement. Details of the book value of Xtb’s net assets acquired, consideration paid and the resulting goodwill and other intangibles, are set out below.

Book and fair value £’000 Intangible assets ...... 490 Property, plant and equipment ...... 1,966 Trade and other receivables...... 8,834 Cash and cash equivalents ...... 56,825 Liabilities...... (28,972) Provisions ...... (29,272) Net assets acquired...... 9,871 Minority interest ...... (4,853) Group interest in fair value of net assets acquired ...... 5,018 Costs of acquisition ...... (530) Gain on deemed disposal...... (4,758) Goodwill (note 14) ...... (270)

Xtb contributed £2,928,000 to the group’s profit in 2004.

(iii) Impact on Xchanging group The results of operations, as if the above acquisition had been made at the beginning of 2004 is as follows:

Group 2004 £’000 Revenue...... 307,602 Operating profit ...... 18,567

139 XCHANGING B.V. Notes to the financial information (Continued)

(iv) Landmark Business Consulting Limited On 1 January 2006 the group acquired 100% of the equity of Landmark Business Consulting Limited, a specialist company in business transformation, concentrating on business advisory and contract labour within the professional services division of the UK insurance sector. Details of net assets acquired and goodwill are as follows:

Fair value £’000 Purchase consideration: — Deferred consideration...... 2,898 — Contingent consideration ...... 472 — Costs of acquisition...... 13 Total purchase consideration...... 3,383 Fair value of net assets acquired ...... (120) Goodwill (note 14) ...... 3,263

The goodwill is attributable to the workforce of the acquired business and the synergies expected to arise after the group’s acquisition of Landmark Business Consulting Limited. The deferred and contingent consideration has been discounted using the effective interest rate at the time of acquisition, being market rate of 5.75% The contingent consideration takes the form of bonds, contingent on the performance of the business over the period to 31 December 2008. The amount estimated as probable has been included in contingent consideration above. The assets and liabilities as of 1 January 2006 arising from the acquisition are set out below:

Acquiree’s carrying amount Fair value £’000 £’000 Non-contractual customer relationship (included in intangibles) (note 15)...... — 170 Property, plant and equipment (note 16)...... 3 3 Trade and other receivables...... 934 934 Trade and other payables...... (651) (669) Borrowings ...... (4) (4) Current tax liabilities ...... (263) (263) Deferred tax liabilities...... — (51) Net assets acquired...... 19 120

The acquired business contributed revenues of £2,750,000 and net profit after tax of £660,000 to the group during 2006.

(v) Ferguson Snell and Associates Limited On 1 April 2006 the group acquired 100% of the equity of Ferguson Snell and Associates Limited, a company providing immigration consultancy services in the UK.

140 XCHANGING B.V. Notes to the financial information (Continued)

Details of net assets acquired and goodwill are as follows:

Fair value £’000 Purchase consideration: — Initial cash consideration ...... 3,275 — Contingent consideration ...... 2,623 — Costs of acquisition...... 102 Total purchase consideration...... 6,000 Fair value of net assets acquired ...... (1,062) Goodwill (note 14) ...... 4,938

The goodwill is attributable to the workforce of the acquired business and the synergies expected to arise after the group’s acquisition of Ferguson Snell and Associates Limited. The contingent consideration has been discounted using the effective interest rate at the time of acquisition, being market rate of 7.5% The contingent consideration takes the form of cash, contingent on the performance of the business over the period to 31 March 2007. The amount estimated as probable has been included in contingent consideration above. The assets and liabilities as of 1 April 2006 arising from the acquisition are set out below:

Acquiree’s carrying amount Fair value £’000 £’000 Non-contractual customer relationship (included in intangibles) (note 15)...... — 694 Property, plant and equipment (note 16)...... 196 137 Trade and other receivables...... 738 716 Cash ...... 406 406 Trade and other payables...... (466) (466) Borrowings ...... (22) (22) Current tax liabilities ...... (195) (195) Deferred tax liabilities...... — (208) Net assets acquired...... 657 1,062

The acquired business contributed revenues of £2,337,000 and net profit after tax of £561,000 to the group during 2006.

(vi) Xchanging Broking Services Limited With effect from 1 September 2006, the Xchanging Group entered into an enterprise partnership by subscribing for 50% of the equity in a new company, Xchanging Broking Services Limited. Employees were transferred into the new company, which is accounted for as a business combination under IFRS 3.

141 XCHANGING B.V. Notes to the financial information (Continued)

Details of the fair value of the assets associated with the transfer of the employees, consideration paid and the resulting goodwill are set out below.

Fair value £’000 Deferred tax assets...... 25 Trade and other payables...... (83) Net liabilities acquired...... (58) Minority interests’ share of liabilities...... 29 Group interest in fair value of net liabilities acquired...... (29) Costs of business combination ...... — Net liabilities assumed...... 29 Goodwill (note 14) ...... 29

The acquired business contributed revenues of £11,519,000 and net profit after tax of £1,000 to the group during 2006.

(iv) Impact on Xchanging group If the above business combinations had been made at the beginning of 2006, group revenue would have been £417,100,000 and net profit would have been £17,577,000. These amounts have been calculated using the group’s accounting policies and adjusting the results of the subsidiaries to reflect the additional depreciation and amortisation that would have been charged assuming the fair value adjustments had applied from 1 January 2006, together with the consequential tax effects.

36 Retirement benefit obligations The group participates in a number of pension schemes covering many of its employees. The principal funds are the LPC Scheme, the Rebus Scheme, the Xtb Scheme, the Lloyd’s Pension Scheme, the BAE Schemes, each of which are defined benefit schemes, and the Xchanging defined contribution schemes. The total retirement benefit obligation for the defined benefit schemes recognised in the balance sheet is:

2004 2005 2006 £’000 £’000 £’000 LPC Scheme ...... 6,773 5,326 1,548 Rebus Scheme ...... 20,685 22,528 17,839 Xtb Scheme...... 427 658 2,514 Retirement benefit obligation recognised in the balance sheet...... 27,885 28,512 21,901

The total actuarial gains/(losses) for the defined benefit schemes recognised in the statement of recognised income and expense is:

2004 2005 2006 £’000 £’000 £’000 LPC Scheme ...... (1,557) 1,513 3,845 Rebus Scheme ...... (3,219) (1,544) 5,328 Xtb Scheme...... 1,271 (149) (1,156) Actuarial gains/(losses) recognised in the statement of recognised income & expense...... (3,505) (180) 8,017

142 XCHANGING B.V. Notes to the financial information (Continued)

(i) LPC Scheme In the most recent actuarial valuation of the LPC pension plan, the principal assumptions made by the actuaries were:

2004 2005 2006 %%% Rate of increase in pensionable salaries...... 3.75 3.75 3.80 Rate of increase in pensions in payment (RPI up to 5%) .. 2.75 2.75 2.75 Rate of increase in pensions in payment (RPI up to 2.5%)...... 0.00 1.90 1.95 Rate of increase in deferred pensions ...... 2.75 2.75 2.80 Discount rate ...... 5.40 4.80 5.10 Inflation assumption ...... 2.75 2.75 2.80 Expected return on plan assets...... 6.34 5.68 6.76

To develop the expected long term rate of return on assets assumption, the group considered the current level of expected returns on risk free investments (primarily government bonds), the historical level of the risk premium associated with the other asset classes in which the portfolio is invested and the expectations for future returns of each asset class. The expected return for each asset class was then weighted based on the target asset allocation to develop the expected long term rate of return assumption for the portfolio. The mortality tables used for the scheme are the PMA 92 and PFA 92 series. Under these assumptions, the life expectancy for a male current pensioner at age 65 is 19.4 years (2005: 16.9 years) (2004: 16.9 years) and for a male future pensioner at age 65 is 20.5 years (2005: 19.4 years) (2004: 19.4 years). The weighted average asset allocations of the fair value of the total plan assets in the defined benefit section of the scheme were:

2004 2005 2006 %%% Equities...... 66.78 66.37 67.41 Bonds ...... 32.85 33.47 32.45 Other...... 0.37 0.16 0.14 Total...... 100.00 100.00 100.00

The retirement benefit obligation recognised in the balance sheet is:

2004 2005 2006 £’000 £’000 £’000 Present value of funded obligations ...... (34,110) (36,104) (35,292) Fair value of plan assets...... 27,337 30,778 33,744 Net deficit recognised in the balance sheet ...... (6,773) (5,326) (1,548)

143 XCHANGING B.V. Notes to the financial information (Continued)

The amounts recognised in the income statement are as follows:

2004 2005 2006 £’000 £’000 £’000 Current service cost ...... (577) (611) (662) Interest cost ...... (1,642) (1,747) (1,748) Expected return on plan assets...... 1,670 1,728 1,744 Total included within staff costs (note 9)...... (549) (630) (666) Included within: Administrative expenses...... (577) (611) (662) Finance income/(costs)...... 28 (19) (4) (549) (630) (666)

The amounts recognised in the statement of recognised income and expense are:

2004 2005 2006 £’000 £’000 £’000 Net actuarial (losses)/gains recognised during the year ...... (1,557) (2,466) 3,845 Past service income re removal of discretionary pension increase...... — 3,979 — (1,557) 1,513 3,845 Cumulative (losses)/gains recognised in the statement of recognised income and expense...... (1,313) 200 4,045

Analysis of the movement in the present value of the defined benefit obligation

2004 2005 2006 £’000 £’000 £’000 Present value of obligation in scheme as at 1 January...... (29,879) (34,110) (36,104) Current service cost ...... (577) (611) (662) Interest cost ...... (1,642) (1,747) (1,748) Plan participants contributions paid...... ——(72) Past service income re removal of discretionary pension increase...... — 3,979 — Actuarial (losses)/gains...... (2,624) (4,357) 2,462 Benefits paid...... 612 742 832 Present value of obligation in scheme as at 31 December .. (34,110) (36,104) (35,292)

Analysis of the movement in the fair value of the plan assets

2004 2005 2006 £’000 £’000 £’000 Fair value of scheme assets as at 1 January...... 24,601 27,337 30,778 Expected return on plan assets...... 1,670 1,728 1,744 Actuarial gains...... 1,067 1,891 1,383 Employer contributions paid ...... 611 564 599 Plan participants contributions paid...... ——72 Benefits paid...... (612) (742) (832) Fair value of scheme assets as at 31 December ...... 27,337 30,778 33,744 Actual return on plan assets...... 2,737 3,619 3,127

144 XCHANGING B.V. Notes to the financial information (Continued)

The group’s transition date to IFRS was 1 January 2003 and the following historical data has been presented from that date. The historical data will be built up to a rolling five-year record over the next year.

2003 2004 2005 2006 £’000 £’000 £’000 £’000 History of experience adjustments on plan assets and liabilities Fair value of scheme assets ...... 24,601 27,337 30,778 33,744 Present value of defined benefit obligations.. (29,879) (34,110) (36,104) (35,292) Net liability recognised...... (5,278) (6,773) (5,326) (1,548)

Experience adjustments on plan assets Amount (£’000) ...... 1,938 1,067 1,891 1,383 Percentage of scheme assets...... 8% 4% 6% 4%

Experience adjustments on plan liabilities Amount (£’000) ...... (285) (371) (313) (461) Percentage of scheme liabilities ...... (1%) (1%) (1%) (1%)

The expected contributions to the defined benefit section of the pension scheme in 2007 are £622,000.

(ii) Rebus Scheme In the most recent actuarial valuation of the Rebus pension plan, the principal assumptions made by the actuaries were:

2004 2005 2006 %%% Rate of increase in pensionable salaries...... 3.80 3.80 3.80 Rate of increase in pensions in payment (RPI up to 5%) .. 2.55 2.50 2.75 Rate of increase in pensions in payment (fixed 5%)...... 5.00 5.00 5.00 Discount rate ...... 5.30 4.90 5.10 Inflation assumption and rate of increase in deferred pensions ...... 2.80 2.80 2.80 Expected return on plan assets...... 6.27 5.68 6.19

The expected return on plan assets is determined with reference to the expected long term level of dividends, interest and other returns derived from the plan assets. The expected returns are based on long term market expectations and analysed on a regular basis to ensure any sustained movements in underlying markets are reflected. The mortality tables used for the scheme are the PMA 92 and PFA 92 series. Under these assumptions, the life expectancy for a male current pensioner at age 65 is 19.4 years (2005: 17.9 years) (2004: 17.9 years) and for a male future pensioner at age 65 is 20.5 years (2005: 19.0 years) (2004: 19.0 years).

145 XCHANGING B.V. Notes to the financial information (Continued)

The weighted average asset allocations of the fair value of the total plan assets in the defined benefit section of the scheme were:

2004 2005 2006 %%% Equities...... 39.57 40.49 41.18 Bonds ...... 48.25 24.56 24.14 Gilts...... 0.00 24.28 23.16 Property ...... 9.81 9.35 10.17 Cash ...... 0.00 0.00 0.07 Insurance annuity contracts...... 2.37 1.32 1.28 Total...... 100.00 100.00 100.00

The retirement benefit obligation recognised in the balance sheet is:

2004 2005 2006 £’000 £’000 £’000 Present value of funded obligations ...... (49,350) (57,156) (56,310) Fair value of plan assets...... 28,665 34,628 38,471 Net deficit recognised in the balance sheet ...... (20,685) (22,528) (17,839)

The amounts recognised in the income statements are as follows:

2004 2005 2006 £’000 £’000 £’000 Current service cost ...... (1,035) (1,079) (1,175) Interest cost ...... (2,374) (2,688) (2,869) Expected return on plan assets...... 1,785 1,832 2,002 Total included within staff costs (note 9)...... (1,624) (1,935) (2,042) Included within: Administrative expenses...... (1,035) (1,079) (1,175) Finance costs...... (589) (856) (867) (1,624) (1,935) (2,042)

The amounts recognised in the statement of recognised income and expense are:

2004 2005 2006 £’000 £’000 £’000 Net actuarial (losses)/gains recognised during the year ...... (3,219) (1,544) 5,328 Cumulative amounts recognised in the statement of recognised income and expense...... (3,219) (4,763) 565

146 XCHANGING B.V. Notes to the financial information (Continued)

Analysis of the movement in the present value of the defined benefit obligation

2004 2005 2006 £’000 £’000 £’000 Present value of obligation in scheme as at 1 January...... — (49,350) (57,156) Acquired in business combination...... (42,002) —— Current service cost ...... (1,035) (1,079) (1,175) Interest cost ...... (2,374) (2,688) (2,869) Plan participants contributions paid...... (283) (375) (462) Actuarial (losses)/gains...... (4,003) (4,596) 4,718 Benefits paid...... 347 932 634 Present value of obligation in scheme as at 31 December .. (49,350) (57,156) (56,310)

Analysis of the movement in the fair value of the plan assets

2004 2005 2006 £’000 £’000 £’000 Fair value of scheme assets as at 1 January...... — 28,665 34,628 Acquired in business combination...... 24,897 —— Expected return on plan assets...... 1,785 1,832 2,002 Actuarial gains...... 784 3,052 610 Employer contributions paid ...... 1,263 1,636 1,403 Plan participants contributions paid...... 283 375 462 Benefits paid...... (347) (932) (634) Fair value of scheme assets as at 31 December ...... 28,665 34,628 38,471 Actual return on plan assets...... 2,569 4,884 2,612

The group acquired RebusIS on 1 January 2004 and the following historical data has been presented from that date. The historical data will be built up to a rolling five-year record over the next two years.

2004 2005 2006 £’000 £’000 £’000 History of experience adjustments on plan assets and liabilities Fair value of scheme assets ...... 28,665 34,628 38,471 Present value of defined benefit obligations...... (49,350) (57,156) (56,310) Net liability recognised...... (20,685) (22,528) (17,839)

Experience adjustments on plan assets Amount (£’000) ...... 784 3,052 610 Percentage of scheme assets...... 3% 9% 2%

Experience adjustments on plan liabilities Amount (£’000) ...... 134 1,435 695 Percentage of scheme liabilities ...... 0% 3% 1%

The expected contributions to the defined benefit section of the pension scheme in 2007 are £2,402,000. This includes a special contribution of £250,000 due in January 2007.

147 XCHANGING B.V. Notes to the financial information (Continued)

(iii) Xtb defined benefit Scheme In the most recent actuarial valuation of the Xtb pension plan, the principal assumptions made by the actuaries were:

2004 2005 2006 %%% Rate of increase in pensionable salaries...... 2.50 2.50 2.50 Rate of increase in pensions in payment and deferred pensions ...... 2.00 2.00 2.00 Discount rate ...... 5.00 4.25 4.60 Expected return on plan assets...... 5.00 5.00 5.00

The expected return on plan assets reflects the average rate of earnings expected on the funds invested or to be invested to provide benefits. The expected long term rate of return on plan assets is used (with the market related value of assets) to compute the expected return on assets. The mortality table used in the scheme is Richttafeln 2005 G, Heubeck-Richttafeln GmbH, Koln¨ 2005. Under these assumptions, the life expectancy for a male current pensioner at age 65 is 17.2 years (2005: 17.2 years) (2004: 17.2 years) and for a male future pensioner at age 65 is 23.6 years (2005: 23.6 years) (2004: 23.6 years). The weighted average asset allocations of the fair value of the total plan assets in the defined benefit section of the scheme were:

2004 2005 2006 %%% Equities...... 17.47 17.00 8.08 Bonds and gilts...... 63.10 71.56 67.92 Cash ...... 13.77 8.78 22.34 Other...... 5.66 2.66 1.66 Total...... 100.00 100.00 100.00

The retirement benefit obligation recognised in the balance sheet is:

2004 2005 2006 £’000 £’000 £’000 Present value of funded obligations ...... (45,713) (51,586) (50,250) Fair value of plan assets...... 45,286 50,928 47,736 Net deficit recognised in the balance sheet ...... (427) (658) (2,514)

The amounts recognised in the income statements are as follows:

2004 2005 2006 £’000 £’000 £’000 Current service cost ...... (788) (1,352) (1,144) Interest cost ...... (1,226) (2,184) (2,148) Expected return on plan assets...... 1,273 2,142 2,522 Total included within staff costs (note 9)...... (741) (1,394) (770) Included within: Administrative costs...... (788) (1,352) (1,144) Finance costs...... 47 (42) 374 (741) (1,394) (770)

148 XCHANGING B.V. Notes to the financial information (Continued)

The amounts recognised in the statement of recognised income and expense are as follows:

2004 2005 2006 £’000 £’000 £’000 Net actuarial gains/(losses) recognised during the year ...... 1,271 (149) (1,156) Foreign exchange differences ...... (74) 10 22 1,197 (139) (1,134) Cumulative amounts recognised in the statement of total recognised income and expense...... 1,197 1,058 (76)

Analysis of the movement in the present value of the defined benefit obligation

2004 2005 2006 £’000 £’000 £’000 Present value of obligation in scheme as at 1 January...... — (45,713) (51,586) Acquired in business combination...... (40,996) —— Current service cost ...... (788) (1,352) (1,144) Interest cost ...... (1,226) (2,184) (2,148) Actuarial (losses)/gains...... (1,623) (4,866) 2,206 Contributions paid ...... 1,100 226 48 Benefits paid...... 543 1,075 1,232 Foreign exchange differences ...... (2,723) 1,228 1,142 Present value of obligation in scheme as at 31 December .. (45,713) (51,586) (50,250)

Analysis of the movement in the fair value of the plan assets

2004 2005 2006 £’000 £’000 £’000 Fair value of scheme assets as at 1 January...... — 45,286 50,928 Acquired in business combination...... 38,471 —— Expected return on plan assets...... 1,273 2,142 2,522 Actuarial gains/(losses)...... 2,894 4,717 (3,362) Benefits paid...... ——(1,232) Foreign exchange differences ...... 2,648 (1,217) (1,120) Fair value of scheme assets as at 31 December ...... 45,286 50,928 47,736 Actual return on plan assets...... 4,167 6,859 (840)

The group acquired Xtb on 1 June 2004 and the following historical data has been presented from that date. The historical data will be built up to a rolling five-year record over the next two years.

2004 2005 2006 £’000 £’000 History of experience adjustments on plan assets and liabilities Fair value of scheme assets ...... 45,286 50,928 47,736 Present value of defined benefit obligations...... (45,713) (51,586) (50,250) Net liability recognised...... (427) (658) (2,514)

149 XCHANGING B.V. Notes to the financial information (Continued)

Seven months to Year to Year to 31 December 31 December 31 December 2004 2005 2006 £’000 £’000 £’000 Experience adjustments on plan assets Amount...... 2,894 4,717 (3,362) Percentage of scheme assets...... 6% 9% 7%

The historical data with respect to plan liabilities has been presented from 1 January 2006 in accordance with the amendment to IAS 19.

Year to 31 December 2006 £’000 Experience adjustments on plan liabilities Amount...... 200 Percentage of scheme liabilities ...... 0.4%

The expected contributions to the defined benefit section of the pension scheme in 2007 are £nil.

(iv) The Lloyd’s Pension Scheme The group participates in a defined benefit scheme operated by Lloyd’s. The terms on which the group participates in the scheme were set in commercial agreements reached with Lloyd’s during 2001. An actuarial valuation by external professional actuaries is carried out triennially to determine the funding position and the payments to be made to the scheme. The group’s contribution rate is set in relation to the cost of accrual of future service benefits only. No past service costs are suffered by the group as these are borne by the Corporation of Lloyd’s. The group’s contributions are not affected by any surplus or deficit in the scheme relating to the past service of its own employees or other members of the scheme. Also, it is not possible to identify the group’s share of the underlying assets and liabilities of the scheme on a consistent and reasonable basis. Accordingly, the group accounts for contributions to the scheme as if it were a defined contribution scheme under IAS 19. Lloyd’s has given notice such that the group’s participation in the Lloyd’s Pension scheme will cease from 30 June 2007 and replacement arrangements will be set up by the group. A final payment to the Lloyd’s Pension scheme will be required by the group on exit, the group is indemnified against such payments under the agreements setting out the terms of its participation in the scheme. If the proposals go ahead, it is anticipated that the group will implement a replacement scheme at similar cost. The pension cost that was charged in the income statement for the year relating to current year contributions was £1,439,000 (2005: £1,885,000) (2004: £1,529,000). Pension contributions outstanding at the year end amount to £nil (2005: £290,000) (2004: £nil).

(v) The BAE Schemes The group also participates in a number of multi-employer defined benefit schemes run for the employees of BAE Systems plc. The terms on which the group participated in these schemes up to the end of 2006 were set in commercial agreements reached with BAE Systems during 2001. The terms of participation were renegotiated in 2006 and revised contribution rates were implemented during 2006. Under the terms of the new agreements, the contributions payable by the group represent the cost of accrual of future service benefits and the group’s share of the deficit contributions made by BAE to the schemes only (not including any one off contributions made by BAE during 2006). The

150 XCHANGING B.V. Notes to the financial information (Continued)

contributions are expressed as fixed percentages of pensionable payroll. The group’s contribution rates to the schemes are contractually fixed and will only be affected by changes to the cost of accrual of future service benefits, as determined at the triennial valuations of the schemes. The group’s contribution rates will not be affected by any future changes in the past service position of the schemes, relating to past service of its own employees or other members of the scheme. It is not possible to identify the group’s share of the underlying assets and liabilities of the schemes on a consistent and reasonable basis. Accordingly, the group accounts for contributions to the schemes as if they were defined contribution schemes under IAS 19. The pension cost that was charged in the income statement relating to current year contributions was £1,279,000 (2005: £851,000) (2004: £926,000). The group’s estimated contributions to the BAE pension schemes for 2007 are £1,160,000.

(vi) Xchanging Group defined contribution schemes The group also participates in a number of defined contribution schemes run for the employees of various subsidiary companies of Xchanging B.V. Pension costs for the group that were charged to the income statement for the year relating to current year contributions were £1,552,000 (2005: £840,000) (2004: £596,000).

37 Ultimate controlling party Xchanging B.V. is controlled jointly by General Atlantic Partners LLP and the Chief Executive Officer, David Andrews, the founding partners. General Atlantic Partners LLP is the majority shareholder through a number of its group companies’ shareholdings in Xchanging B.V., which act in concert within the context of a group. David Andrews is able to appoint the majority of the Board of Xchanging B.V.

38 Related party transactions The following companies are considered to be related parties of the group as they hold minority shareholdings in a number of the subsidiaries of Xchanging B.V. The Corporation of Lloyd’s held a 25% interest in Ins-sure Holdings Limited and a 50% interest in Xchanging Claims Services Limited at 31 December 2006. Some of the directors of Xchanging Claims Services Limited are employees of the Corporation of Lloyd’s. The emoluments of these directors were borne by the Corporation of Lloyd’s. The International Underwriting Association held a 25% interest in Ins-sure Holdings Limited at 31 December 2006. BAE Systems plc held a 50% interest in Xchanging Procurement Services (Holdco) Limited and a 50% interest in HR Enterprise Limited at 31 December 2006. Employees of BAE Systems plc formed parts of the boards of directors of Xchanging Procurement Services (Holdco) Limited and HR Enterprise Limited. The emoluments of these directors were borne by BAE Systems plc. Deutsche Bank AG held a 44% interest in Xchanging etb GmbH at 31 December 2006. Some of the directors of Xchanging etb GmbH are employees of Deutsche Bank AG. The emoluments of these directors were borne by Deutsche Bank AG. Aon Limited held a 50% interest in Xchanging Broking Services Limited. Some of the directors of Xchanging Broking Services Limited are employees of Aon Limited. The emoluments of these directors were borne by Aon Limited.

151 XCHANGING B.V. Notes to the financial information (Continued)

A description of the nature of the services provided from these companies by/to the group and the amount receivable/(payable) in respect of each at 31 December 2006, are set out in the table below:

Services provided Sales/(purchases) Year end receivables/(payables) by/to the group 2004 2005 2006 2004 2005 2006 £’000 £’000 £’000 £’000 £’000 £’000 Securities processing services ...... 58,206 89,482 66,330 2,029 6,015 1,141 Processing, expert and data services ...... 1,115 757 13,160 89 22 363 Property charges ...... 431 673 1,316 — 10 187 HR and procurement 65,737 113,527 129,001 6,929 5,937 6,181 services ...... { — { (1,165) { (6,880) IT costs, premises, divisional corporate charges and other services in support of operating activities...... (20,919) (32,846) (29,507) (3,310) (5,309) (3,818) Operating systems, development, premises and other services in support of operating activities ...... (4,562) (2,385) (1,117) (671) (395) (319) Desktop, hosting, telecommunications, accommodation and processing services...... ——(2,802) ——(2,202) Accommodation, IT services and directors’ secondment charges ...... (1,235) (947) (1,259) (606) (324) (154) Property charges ...... — (108) ———— Current accounts ...... ———43,401 29,543 1,804

In respect of 2004, £398,697 was due from the following officers in respect of the exercise of options during the year ended 31 December 2003.

Officer

J Attenborough S Bowen A Browne C Buesnel R Houghton D Rich-Jones The loans bore interest at the rate of 5% per annum and, save in respect of the loan due from J Attenborough, were fully repaid at the 2005 year end. In respect of 2005, £39,226 was due from J Attenborough in respect of the exercise of options. This was fully repaid at the 2005 year end.

39 IFRS 7 sensitivity analysis The group has used a sensitivity analysis technique that measures the estimated change to the income statement and equity of either an instantaneous increase or decrease of 1% (100 basis points) in market interest rates or a 10% strengthening or weakening in sterling against all material currencies (Euros and rupees) for each class of financial instrument with all other variables remaining constant. The sensitivity analysis excludes the impact of market risks on net post employment benefit

152 XCHANGING B.V. Notes to the financial information (Continued)

obligations. This analysis is for illustrative purposes only, as in practice market rates rarely change in isolation. The sensitivity analysis is based on the following assumptions:

Interest rate risks Changes in market interest rates affect the interest income or expense of variable interest financial instruments. Changes in market interest rates only affect interest income or expense in relation to financial instruments with fixed interest rates if these are recognised at their fair value. Under these assumptions, a 1% increase or decrease in market interest rates for all material currencies in which the group had borrowings and derivative financial instruments would increase or decrease profit before tax by approximately £600,000 and equity by £300,000 before tax.

Foreign exchange risks Material entities reporting in foreign currencies and material foreign currency financial instruments within sterling reporting entities have been included. With a 10% strengthening or weakening of sterling against all material currencies (Euros and rupees), profit before tax would have decreased by approximately £200,000 or increased by £300,000, respectively, and equity would have decreased by approximately £1,500,000 or increased by £1,800,000, respectively.

Fair value sensitivity analysis This fair value sensitivity analysis expresses information about changes in fair values of financial instruments for 31 December 2006. The amounts generated from the sensitivity analysis are forward- looking estimates of market risk assuming certain adverse market conditions occur. Actual results in the future may vary materially from those projected results due to developments in the global financial markets which may cause fluctuations in interest and exchange rates to vary from hypothetical amounts disclosed in the following table, which therefore should not be considered a projection of likely future events and losses. The estimated changes in fair values of borrowings which affect equity are set out in the table below:

Fair value changes Carrying arising from value at 10% 31 December 1% fall in weakening 2006 interest rates in sterling £’000 Borrowings (note 22)...... (3,270) —— Non-current financial liabilities (note 24) ...... (20,182) (317) —

Credit risk Details of the group’s credit risk policies and exposures are presented in note 3. An analysis of all debts which are past due is included in note 18.

40 Events after the balance sheet date (i) HR Enterprise Limited With effect from 1 January 2007, the Xchanging group acquired the remaining 50% minority holding in the HR Enterprise Limited enterprise partnership from BAE Systems plc. This 50% interest was acquired by HR Holdco Limited, a subsidiary of Xchanging B.V.

153 XCHANGING B.V. Notes to the financial information (Continued)

Details of the minority interests’ share of the book and fair value of the assets of HR Enterprise Limited acquired, consideration paid and the resulting goodwill are set out below: Book and fair value £’000 Costs of acquisition – consideration...... 10,082 Minority interests’ share of net assets acquired ...... (372) Goodwill...... 9,710

BAE Systems plc no longer has any representatives on the HR Enterprise board of directors and have no influence in the business decisions of the entity.

(ii) Xchanging Procurement Services (Holdco) Limited With effect from 1 January 2007, the Xchanging group acquired the remaining 50% minority holding in the Xchanging Procurement Services (Holdco) Limited enterprise partnership from BAE Systems plc. This 50% interest was acquired by XUK Holdco (No 2) Limited, a subsidiary of Xchanging B.V. Details of the minority interests’ share of the book and fair value of the assets of Xchanging Procurement Services (Holdco) Limited acquired, consideration paid and the resulting goodwill are set out below: Book and fair value £’000 Costs of acquisition – consideration...... 46,590 Minority interests’ share of net assets acquired ...... (2,790) Goodwill...... 43,800

The consideration has been discounted using the effective interest rate at the time of the acquisition, being market rate of 7.5% The date for payment of the consideration is contingent upon certain events and the most probable date for payment has been used to calculate the fair value above. The cost of acquisition is therefore provisional. BAE Systems plc no longer has any representatives on the Xchanging Procurement Services (Holdco) Limited board of directors and has no influence in the business decisions of the entity.

154 PART 5: ACCOUNTANTS’ REPORTS AND FINANCIAL INFORMATION

SECTION B – ACCOUNTANTS’ REPORT AND FINANCIAL INFORMATION FOR XCHANGING TRANSACTION BANK GMBH FOR THE FINANCIAL PERIOD FROM 1 JANUARY 2004 TO 31 MAY 2004

15FEB200619332872

PricewaterhouseCoopers LLP 1 Embankment Place London WC2N 6RH The Directors Xchanging plc 34 Leadenhall Street London EC3A 1AX Citigroup Global Markets Limited (the ‘‘Sponsor’’) Citigroup Centre Canada Square Canary Wharf London E14 5LB

25 April 2007

Dear Sirs

Xchanging Transaction Bank GmbH (‘‘Xtb’’) We report on the financial information set out in Section B of Part 5: Accountants’ Reports and Financial Information. This financial information has been prepared for inclusion in the prospectus dated 25 April 2007 (the ‘‘Prospectus’’) of Xchanging plc on the basis of the accounting policies set out in note 2. This report is required by item 20.1 of Annex I to the PD Regulation and is given for the purpose of complying with that item and for no other purpose.

Responsibilities The Directors of Xchanging plc are responsible for preparing the financial information in accordance with the basis of preparation set out in note 2 to the financial information. It is our responsibility to form an opinion on the financial information as to whether the financial information gives a true and fair view, for the purposes of the Prospectus, and to report our opinion to you. Save for any responsibility which we may have to those persons to whom this report is expressly addressed and for any responsibility arising under item 5.5.3R(2)(f) of the Prospectus Rules to any person as and to the extent there provided, to the fullest extent permitted by law we do not assume any responsibility and will not accept any liability to any other person for any loss suffered by any such other person as a result of, arising out of, or in connection with this report, consenting to its inclusion in the Prospectus.

Basis of opinion We conducted our work in accordance with the Standards for Investment Reporting issued by the Auditing Practices Board in the United Kingdom. Our work included an assessment of evidence relevant to the amounts and disclosures in the financial information. It also included an assessment of significant estimates and judgments made by those responsible for the preparation of the financial information and whether the accounting policies are appropriate to Xtb’s circumstances, consistently applied and adequately disclosed.

155 15FEB200619332872

We planned and performed our work so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial information is free from material misstatement whether caused by fraud or other irregularity or error. Our work has not been carried out in accordance with auditing standards generally accepted in the United States of America or auditing standards of the Public Accounting Oversight Board (United States) and accordingly should not be relied upon as if it had been carried out in accordance with those standards.

Opinion In our opinion, the financial information gives, for the purposes of the Prospectus, a true and fair view of the state of affairs of Xtb as at the date stated and of its profit, cash flow and statement of recognised income and expense for the period then ended in accordance with the basis of preparation set out in note 2 to the financial information.

Declaration For the purposes of Prospectus Rule 5.5.3R(2)(f) we are responsible for this report as part of the Prospectus and declare that we have taken all reasonable care to ensure that the information contained in this report is, to the best of our knowledge, in accordance with the facts and contains no omissions likely to affect its import. This declaration is included in the Prospectus in compliance with item 1.2 of Annex I of the PD Regulation.

Yours faithfully

PricewaterhouseCoopers LLP Chartered Accountants

156 XCHANGING TRANSACTION BANK GMBH (FORMERLY EUROPEAN TRANSACTION BANK GMBH) Income statement – period ended 31 May

Period from 1 January to 31 May Notes 2004 B’000 Revenue ...... 5 66,990 Cost of sales ...... 6 (64,262) Operating profit ...... 7 2,728 Finance costs ...... 9 (1,320) Finance income...... 9 1,361 Profit before taxation ...... 2,769 Taxation...... 10 (5,677) Loss for the period attributable to equity holders of Xtb...... (2,908)

157 XCHANGING TRANSACTION BANK GMBH Statement of recognised income and expense – period ended 31 May

Period from 1 January to 31 May Notes 2004 B’000 Loss for the period...... (2,908) Actuarial loss arising from defined benefit pension schemes ...... 25 (3,091) Movement on deferred tax relating to pension scheme ...... 17 1,263 Net losses not recognised in income statement ...... (1,828) Total recognised loss for the year attributable to equity shareholders...... (4,736)

158 XCHANGING TRANSACTION BANK GMBH Balance sheet – 31 May

31 May Notes 2004 B’000 Assets Non-current assets Intangible assets...... 11 737 Property, plant and equipment...... 12 2,957 Deferred income tax assets ...... 17 12,173 15,867 Current assets Trade and other receivables...... 13 4,368 Cash and cash equivalents...... 14 85,127 89,495 Liabilities Current liabilities Trade and other payables ...... 15 (43,304) Provisions ...... 16 (13,651) Net current assets ...... 32,540 Total assets less current liabilities ...... 48,407 Non-current liabilities Deferred income tax liabilities...... 17 (468) Retirement benefit obligations ...... 25 (3,795) Provisions ...... 16 (26,100) (30,363) Net assets...... 18,044 Shareholder’s equity Nominal capital...... 18 10,000 Capital reserve ...... 20 8,056 Other reserves...... 21 (1,828) Retained earnings ...... 19 1,816 Total shareholder’s equity ...... 22 18,044

159 XCHANGING TRANSACTION BANK GMBH Cash flow statement – period ended 31 May

Period from 1 January to 31 May Notes 2004 B’000 Cash flows from operating activities Cash generated from operations ...... 24 (43,300) Net cash from operating activities ...... (43,300) Cash flows from investing activities Purchase of property, plant and equipment ...... (182) Purchase of intangible assets ...... (61) Proceeds from sale of property, plant and equipment...... 823 Interest received ...... 1,361 Net cash generated by investing activities...... 1,941 Cash flows from financing activities Interest paid ...... (5) Dividend paid to shareholders...... (23,108) Net cash from financing activities ...... (23,113) Net decrease in cash and cash equivalents ...... (64,472) Cash and cash equivalents at 1 January...... 149,599 Cash and cash equivalents at 31 May ...... 14 85,127

160 XCHANGING TRANSACTION BANK GMBH Notes to the financial information

1 General information Xtb was purchased from Deutsche Bank AG by the Xchanging Group on 1 June 2004 (see note 35 of the Xchanging B.V. financial information) and the results of Xtb from 1 June 2004 have been included in the consolidated financial information for the group. The financial information presented herein is for the five month period from 1 January 2004 to 31 May 2004. Xchanging Transaction Bank GmbH, in its capacity as a bank, possesses a full German Banking Licence and mainly processes securities transactions for other banks. Xtb is incorporated in Germany and located at Wilhelm-Fay-Straße 31-37, 65936 Frankfurt. Following a general meeting of Xtb on 31 March 2004 and subsequent recording in the register on 25 May 2004, the legal form of Xtb was changed from Aktiengesellschaft (AG), a non-listed limited company, to Gesellschaft mit beschrankter¨ Haftung (GmbH), a non-listed limited company funded with nominal capital. On 12 May 2004 the year end was changed from 31 December 2004 to 31 May 2004, due to the impending change of control of Xtb. Xchanging Transaction Bank GmbH changed its name from european transaction bank GmbH via a shareholders’ resolution on 28 April 2006 and subsequent recording in the register on 19 June 2006.

2 Principal accounting policies The principal accounting policies applied in the preparation of this financial information are set out below.

(a) Basis of preparation of the financial information The financial information has been prepared in accordance with the requirements of the PD regulation and the Listing Rules and in accordance with this basis of preparation. The basis of preparation describes how the financial information has been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS as adopted by the EU) except as described below. IFRS as adopted by the EU does not provide for the specific accounting treatments set out below, and accordingly in preparing the financial information certain accounting conventions commonly used for the preparation of historical financial information for inclusion in investment circulars as described in the Annexure to SIR 2000 (Investment Reporting Standard applicable to public reporting engagements on historical financial information) issued by the UK Auditing Practices Board have been applied. The application of these conventions results in the following material departures from IFRS as adopted by the EU. In other respects IFRS as adopted by the EU has been applied.

Presentation of a pre-acquisition track record The financial information has been prepared for Xtb for the period from 1 January 2004 to 31 May 2004, the date Xtb was acquired by Xchanging B.V., in order to form part of the track record of the business of Xchanging B.V. as required by the application of Listing Rule 6.1.4(1). Consequently the financial information includes information for a period that is less than a full accounting period and does not include comparative financial information. The accounting policies applied in the financial information are those of Xchanging B.V. as set out in note 2 to Xchanging B.V.’s financial information included in Section A of Part 5: Accountants’ Reports and Financial Information of the Prospectus. Acquisition accounting adjustments made by Xchanging B.V. on acquisition of Xtb have not been reflected in the financial information. The financial information does not comprise the first IFRS financial statements. With respect to the application of IFRS 1, no comparative information has been presented, as discussed above, and reconciliation to amounts reported under previous GAAP are not included, as detailed below. The financial information does not include reconciliations to amounts reported under previous GAAP as Xtb’s previous GAAP financial information was not publicly available therefore such reconciliations would not provide meaningful information in the context of the Prospectus in which the financial information is presented.

161 XCHANGING TRANSACTION BANK GMBH Notes to the financial information (Continued)

Xtb originally adopted IFRS on acquisition by the Group with a date of transition to IFRS of 1 June 2004. For the purpose of this financial information, IFRS has been applied to the figures for the five months to 31 May 2004, giving a revised transition date of 1 January 2004. Both the functional currency and the presentation currency of the financial information is euros due to Xtb being managed in Germany and the majority of transactions being denominated in euros. The financial information has been prepared under the historical cost convention. A summary of the more important company accounting policies is set out below. The preparation of financial information in conformity with EU endorsed IFRS requires the use of judgments, estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial information and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management’s best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates. The accounting policy descriptions set out the areas where significant judgments, estimates and assumptions have been made.

(b) Revenue recognition Revenue, which excludes value added tax, rebates and discounts, comprises the value of services provided for securities processing services. Revenue is recognised on a straight-line basis according to the period to which the service relates, net of guaranteed rebates to customers.

(c) Segmental reporting The company operates in one business segment, being the provision of financial services and in addition, operates in one geographical segment, being Continental Europe.

(d) Finance income Interest income is reported in the income statement as it arises through the application of the effective interest rate method.

(e) Dividend distribution Dividend distribution to the company’s shareholders is recognised as a liability in the period in which the dividends are due, according to the profit transfer agreement.

(f) Foreign currency transactions (i) Functional and presentation currency Items included in the financial information are measured using the currency of the primary economic environment in which the entity operates (‘‘the functional currency’’). This financial information is presented in euros which is Xtb’s functional and presentation currency.

(ii) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.

(g) Intangible assets Software costs are capitalised where they meet the criteria for recognition under IAS 38. Where the criteria for capitalisation are not met, software expenditure is expensed as incurred. Subsequent expenditure undertaken to ensure that an asset maintains its previously assessed standard of performance, for example routine repairs and maintenance expenditure, is recognised in the income statement as it is incurred. Where subsequent expenditure significantly enhances an asset, this is capitalised.

162 XCHANGING TRANSACTION BANK GMBH Notes to the financial information (Continued)

(h) Property, plant and equipment The cost of tangible fixed assets is their purchase cost, together with any incidental costs of acquisition. Assets in the course of development are not depreciated until completion at which point they are transferred to the relevant fixed asset category. There are no such assets at the year end. Depreciation is calculated so as to write off the cost of tangible fixed assets, less their estimated residual values, on a straight-line basis over the expected useful economic lives of the assets concerned. The principal annual rates used for this purpose are:

Computer equipment ...... 20–33% Fixtures and fittings...... 10–25% Leasehold improvements ...... 10%

(i) Impairment of tangible and intangible assets At each balance sheet date, management reviews its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. Intangible assets are reviewed if a trigger event is deemed to have happened. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, Xtb estimates the recoverable amount of the cash-generating unit to which the asset belongs. No assets have indefinite lives. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects the current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately. Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately.

(j) Financial instruments (i) Financial assets Xtb classifies its financial assets in the following category: loans and receivables. The classification depends on the purpose for which the financial assets were acquired. Xtb determines the classification of its financial assets at initial recognition. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the balance sheet date. These are classified as non-current assets. Loans and receivables are classified as ‘‘trade and other receivables’’ in the balance sheet (note 2 (k)). Regular purchases and sales of financial assets are recognised on the trade-date – the date on which Xtb commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and Xtb has transferred substantially all risks and rewards of ownership. Loans and receivables are carried at amortised cost. Xtb assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired. If any such evidence exists the cumulative loss is recognised in the income statement.

163 XCHANGING TRANSACTION BANK GMBH Notes to the financial information (Continued)

(k) Trade and other receivables Trade and other receivables are recognised at fair value and subsequently measured at amortised cost less provision for impairment.

(l) Cash and cash equivalents Cash and cash equivalents include cash in hand and demand deposits. No cash equivalents were held in 2004.

(m) Trade and other payables Trade and other payables are recognised at fair value and subsequently measured at amortised cost.

(n) Operating leases Rental costs under operating leases are charged to the income statement on a straight-line basis over the lease term.

(o) Taxation including deferred taxation Current tax is recognised at the amount expected to be paid to (or recovered from) the taxation authorities using the tax rates and laws that have been enacted or substantially enacted by the balance sheet date. Deferred tax is recognised in respect of all temporary differences that have originated but not reversed at the balance sheet date where transactions or events that result in an obligation to pay more, or a right to pay less, tax in the future have occurred at the balance sheet date. Deferred tax assets are regarded as recoverable and therefore recognised, only when, on the basis of all available evidence, the directors consider that it is more likely than not that there will be suitable taxable profits from which the future reversal of the underlying temporary differences can be deducted.

(p) Employee benefit costs (i) Pension obligations Xtb operates, or participates in, both defined contribution and defined benefit pension schemes. All the pension schemes are accounted for in accordance with IAS 19. Professional independent actuaries value the defined benefit schemes annually and the valuations were updated at the year-end. The directors believe that this is sufficiently regular so that the amounts do not differ materially from expectations at the year end. Scheme assets are measured using closing market values at the balance sheet date. Pension scheme liabilities are measured using the projected unit method and discounted at the current rate of return on a high quality corporate bond of equivalent term and currency to the liability. Variations between the scheme assets and liabilities identified as a result of these actuarial valuations (actuarial gains and losses) are recognised in full through the statement of recognised income and expense (SORIE) in that year. Current service costs, expected returns on plan assets and interest costs are charged to the income statement. Past-service costs are recognised immediately in income, unless the changes to the pension plan are conditional on the employees remaining in service for a specified period of time (the vesting period). In this case, the past-service costs are amortised on a straight-line basis over the vesting period. Contributions to the defined contribution schemes are charged to the income statement as incurred.

(q) Provisions Provisions are recognised when a present obligation exists as the result of a past event and it is probable that this will result in an outflow of economic benefit, the size of which can be reliably estimated. Where the provision is long term, such as onerous contract provisions where the unavoidable costs of meeting obligations exceed any economic benefits expected to be received, the net cash flows are discounted using Xtb’s appropriate pre-tax discount rate.

164 XCHANGING TRANSACTION BANK GMBH Notes to the financial information (Continued)

There are no other known risks which bear the risk of material adjustments to the carrying amounts of assets and liabilities. Restructuring provisions are only recognised if an obligation exists at the balance sheet date i.e. a formal plan exists and those affected by that plan have a valid expectation that the restructuring will be carried out.

(r) Share capital Share capital comprises the typically fully paid nominal capital of a German limited company (GmbH). The nominal capital does not comprise of individual shares but is considered as one lump sum. On investing the capital any excess consideration over the nominal value of the share capital less any investing costs is credited to the capital reserve account.

(s) Exceptional items Exceptional items are events or transactions that fall within the activities of Xtb, and, which by virtue of their size or incidence, have been disclosed in order to improve a reader’s understanding of the financial information.

3 Financial risk management Xtb’s operations expose it to a variety of financial risks. Up to 31 May 2004, Xtb was integrated into Deutsche Bank’s risk management. Therefore the policies followed were those established by Deutsche Bank. These policies were regularly reviewed. Xtb’s financial instruments comprise cash and liquid resources and various items, such as trade receivables and trade payables that directly arise from its operations. It is Xtb’s policy that no trading in financial instruments or speculative transactions be undertaken.

Operational risk Due to the nature of its business, Xtb’s most significant risk relates to operational risk deriving from errors in the securities transaction business. A process is in place to monitor the operational risk which complies with the German banking regulations relevant to Xtb and which assists with the calculation of the necessary provision. Up to 31 May 2004, a special database set up by Deutsche Bank was used to record all mishandling incidents. After 31 May 2004, Xtb set up its own policies and a more advanced database which allowed more detailed tracking of individual incidents.

Interest rate risk Xtb reviews its interest rate profile against acceptable risk profiles. Working capital is generally held in an interest paying bank account.

Foreign exchange risk Xtb has no major foreign exchange risk and no hedging takes place.

Liquidity risk During the period Xtb’s cash management was performed by the Group Treasury department of Deutsche Bank. Due to the significant levels of cash, Xtb has low liquidity risk. Xtb has no borrowings.

Market risk Xtb does not hold any investments, other than the assets held within the pension scheme, which are invested in a mixture of equities, bonds and gilts. The market risk is low due to this diversification.

165 XCHANGING TRANSACTION BANK GMBH Notes to the financial information (Continued)

Credit risk Xtb has a credit risk with respect to trade receivables due to the nature and structure of its business, which is mitigated to a certain extent as the majority of counterparties are regulated banks. Credit risk assessments are performed for new customers. The maximum counterparty risk was A89,495,000. In the period there was a high concentration of credit risk with Deutsche Bank, who required Xtb’s current account to be held with them. The money deposited with Deutsche Bank exceeded the amount of Xtb’s nominal capital.

Commodity risk Commodity risk is not considered to be applicable to Xtb as Xtb does not perform any transactions of commodities.

4 Critical accounting judgments Xtb’s principal accounting policies are set out in note 2 to this financial information. Management is required to exercise significant judgment and make use of estimates and assumptions in the application of these policies. Areas which management believes require the most critical accounting judgments are:

(i) Retirement benefit obligations Xtb operates a number of defined benefit plans, which collectively form the Xtb defined benefit scheme. The retirement benefit obligations recorded are based on actuarial assumptions, including discount rates, expected long-term rate of return on plan assets, inflation and mortality rates. The assumptions are based on current market conditions, historical information and consultation with and input from actuaries. Management reviews these assumptions annually. If the assumptions change, or if actual experience is different from the assumptions, the funding status of the plan will change and the retirement benefit obligation will be adjusted accordingly. The assumptions used are detailed in note 25.

(ii) Exceptional items The directors consider that items of income or expense which are material and non-recurring by virtue of their nature and amount should be disclosed separately if the financial information is to fairly present the financial position and financial performance of Xtb. The directors label these items collectively as ‘‘exceptional items’’. Xtb did not have any exceptional items in the period to 31 May 2004.

(iii) Provisions The most significant provisions are for operational risk, early and part-time retirement, severance and long service payments. All of these provisions apart from the provision for operational risk are valued annually by an actuary and discounted. For operational risk, see note 3.

(iv) Taxation The level of tax provisioning is dependent on subjective judgment as to the outcome of decisions to be made by the relevant tax authorities. It is necessary to consider the extent to which deferred tax assets should be recognised based on an assessment of the extent to which they are regarded as recoverable.

166 XCHANGING TRANSACTION BANK GMBH Notes to the financial information (Continued)

5 Analysis of revenue by category and geographical destination

Period ended Revenue by category 31 May 2004 B’000 Revenue from financial services ...... 66,990

Period ended Revenue by geographical destination 31 May 2004 B’000 Continental Europe ...... 66,990

6 Expenses by nature

Period ended Notes 31 May 2004 B’000 Direct staff costs ...... 8 28,443 Other staff related costs ...... 3,115 Technology and communications...... 24,801 Property costs...... 3,904 Depreciation, amortisation and impairment charges...... 1,005 Other costs...... 2,994 Total operating expenses...... 64,262

7 Operating profit

Period ended 31 May 2004 B’000 Operating profit is stated after charging/(crediting): Staff costs (note 8)...... 28,443 Depreciation of property, plant and equipment – owned assets (note 12) ...... 781 Net amortisation of intangible assets (note 11) ...... 224 Operating leases – land and buildings ...... 2,106 – plant and machinery...... 262 Profit on disposal of fixed assets ...... (381) Auditors’ remuneration – audit services...... 146

In accordance with the German commercial code an expense equalling the HGB, German GAAP, profit of A10,272,000 was recognised. Similarly an amount of A10,272,000 was recognised as a liability to the parent company, due to the profit transfer agreement with Deutsche Bank.

167 XCHANGING TRANSACTION BANK GMBH Notes to the financial information (Continued)

8 Employees and directors

Period ended Notes 31 May 2004 B’000 Staff costs for the period Wages and salaries...... 22,227 Social security costs...... 4,654 Pension costs — defined benefit scheme ...... 2,287 Pension costs — defined contribution scheme...... 590 29,758

Included within: Operating expenses...... 7 28,443 Finance costs ...... 9 1,315 29,758

Period ended 31 May 2004 Number Average number of persons (including executive directors) employed by the company: Selling and distribution ...... 847 Administration...... 63 910

No employees of Xtb are directors of the Xchanging Group or meet the definition of key management for disclosing key management compensation.

9 Finance costs and income

Period ended 31 May 2004 B’000 Finance costs: Interest payable on bank loans and overdrafts...... (5) Interest cost on defined benefit pension schemes...... (1,315) Finance costs...... (1,320) Finance income: Bank interest...... 1,361 Finance income ...... 1,361 Finance income – net ...... 41

168 XCHANGING TRANSACTION BANK GMBH Notes to the financial information (Continued)

10 Taxation

Period ended 31 May 2004 B’000 Analysis of charge in period Deferred tax: – Continuing operations ...... 5,677

Tax on items credited to equity

Period ended 31 May 2004 B’000 Deferred tax on pension ...... 1,263

Factors affecting the current tax charge for the period The tax for the period consists entirely of deferred tax. A tax rate of 40.86% is applied which reflects 21.18% corporation tax including solidarity surcharge and 19.68% trade tax. The tax for the period is higher than this standard rate. The differences are explained below:

Period ended 31 May 2004 B’000 Profit on ordinary activities before tax ...... 2,769 Profit on ordinary activities multiplied by rate of corporation tax in Germany of 40.86%.... 1,131 Other adjustments to accounting profit & loss ...... (1,131) Short term temporary differences...... 5,677 Tax charge for the period ...... 5,677

The other adjustments to accounting profit and loss relate to the reversal of income taxes as due to the fiscal unity with Deutsche Bank, no income taxes are paid.

11 Intangible assets

Software Total B’000 B’000 Cost At 1 January 2004...... 2,341 2,341 Additions – external...... 61 61 Disposals...... (214) (214) At 31 May 2004 ...... 2,188 2,188 Amortisation At 1 January 2004...... 1,440 1,440 Charge for the period...... 224 224 Disposals...... (213) (213) At 31 May 2004 ...... 1,451 1,451 Net book amount At 31 May 2004 ...... 737 737

Amortisation is charged against cost of sales in the income statement.

169 XCHANGING TRANSACTION BANK GMBH Notes to the financial information (Continued)

12 Property, plant and equipment

Leasehold Computer Fixtures and improvements equipment fittings Total B’000 B’000 B’000 B’000 Cost At 1 January 2004...... 811 6,430 6,050 13,291 Additions...... 19 159 4 182 Disposals ...... — (102) (2,833) (2,935) At 31 May 2004...... 830 6,487 3,221 10,538 Depreciation At 1 January 2004...... 207 4,897 4,190 9,294 Charge for the period ...... 34 514 233 781 Disposals ...... — (88) (2,406) (2,494) At 31 May 2004...... 241 5,323 2,017 7,581 Net book value At 31 May 2004...... 589 1,164 1,204 2,957

Depreciation is charged against cost of sales in the income statement.

13 Trade and other receivables

31 May 2004 B’000 Due within one year: Trade receivables – non related parties ...... 2,642 Trade receivables – related parties ...... 1,363 Less: provision for impairment of receivables ...... — Net trade receivables...... 4,005 Prepayments and accrued income ...... 360 Other receivables ...... 3 4,368

14 Cash and cash equivalents

31 May 2004 B’000 Cash at bank and in hand...... 85,127

15 Trade and other payables – current

31 May 2004 B’000 Trade payables – non related parties ...... 15,686 Trade payables – related parties ...... 21,277 Other taxation and social security ...... 2,294 Other payables...... 2,593 Accruals and deferred income ...... 1,454 43,304

170 XCHANGING TRANSACTION BANK GMBH Notes to the financial information (Continued)

16 Provisions

Operational Property risk Other Total B’000 B’000 B’000 B’000 At 1 January 2004...... 444 6,968 43,044 50,456 Released in the year ...... — (1,394) (3,647) (5,041) Provided in the year ...... — 1,833 3,339 5,172 Utilised in the year ...... (33) (252) (10,551) (10,836) At 31 May 2004 ...... 411 7,155 32,185 39,751

Provisions have been analysed between current and non-current as follows:

31 May 2004 B’000 Current ...... 13,651 Non-current...... 26,100 39,751

The property provision relates to a lease for vacant property, which has 5 years left to run. As the property provision is relating to a contract the amount of the liability is calculated with a high certainty. The operational risk provision comprises an estimated liability in respect of identified operating errors which had occurred in the ordinary course of business up to 31 May 2004. The operational risk provision comprises two categories of incidents. The first category consists of incidents where the amount of the cash flow is defined but there is a small element of uncertainty around the date of this fixed cash flow. The second category covers incidents where the date of cash outflow is set, however there is a small amount of uncertainty around the amount to be paid. The other provision includes, amongst others, provisions for early retirement, severance and long service payments and other personnel related provisions. The provision for early retirement is calculated with reference to a defined period of cash outflows and a small amount of uncertainty surrounding the payments to be made. The provision for long service payments is characterised by a lengthy period of set dates for the cash outflows (based on 25 and 40 years of service) and a higher degree of uncertainty on the amounts which will be paid.

17 Deferred tax Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 40.86% for differences arising in Germany. The movements in deferred tax assets and liabilities (prior to the offsetting of balances within the same jurisdiction as permitted by IAS 12 during the period) are shown below:

Period ended 31 May 2004 B’000 Assets At 1 January 2004...... 16,620 Profit and loss charge...... (5,710) Tax credited to equity – pensions ...... 1,263 At 31 May 2004...... 12,173

171 XCHANGING TRANSACTION BANK GMBH Notes to the financial information (Continued)

Period ended 31 May 2004 B’000 Liabilities At 1 January 2004...... (501) Profit and loss credit ...... 33 At 31 May 2004...... (468)

Deferred tax assets and liabilities are only offset where there is a legal right of offset and there is intention to settle the balance net.

Pension Other Total B’000 B’000 B’000 Deferred tax assets At 1 January 2004...... 7,191 9,429 16,620 Charged to income statement ...... (2,678) (3,032) (5,710) Credited to equity...... 1,263 — 1,263 At 31 May 2004 ...... 5,776 6,397 12,173

Accelerated tax depreciation Total B’000 B’000 Deferred tax liabilities At 1 January 2004...... (501) (501) Credited to income statement...... 33 33 At 31 May 2004 ...... (468) (468)

The deferred income tax credited to equity during the period is as follows:

Period ended 31 May 2004 B’000 Fair value reserves in shareholder’s equity: – actuarial movements on retirement benefit obligations ...... 1,263

18 Nominal capital

Nominal capital B’000 Fully paid At 1 January and at 31 May 2004 ...... 10,000

The share capital comprises of 1 share with nominal value of A10,000,000 at 31 May 2004.

19 Retained earnings

Retained earnings B’000 At 1 January 2004...... 27,832 Retained loss for the period...... (2,908) Dividends paid...... (23,108) At 31 May 2004 ...... 1,816

172 XCHANGING TRANSACTION BANK GMBH Notes to the financial information (Continued)

20 Capital reserve

Capital reserve B’000 At 1 January and at 31 May 2004...... 8,056

21 Other reserves

Other reserves B’000 At 1 January 2004...... — Actuarial loss on pensions ...... (3,091) Deferred tax on pensions taken to reserves...... 1,263 At 31 May 2004 ...... (1,828)

22 Movement in shareholder’s equity

Nominal Capital Other Retained Total capital reserve reserves earnings equity B’000 B’000 B’000 B’000 B’000 At 1 January 2004...... 10,000 8,056 — 27,832 45,888 Net loss...... ———(2,908) (2,908) Actuarial loss on pensions ...... ——(3,091) — (3,091) Deferred tax on pensions taken to reserves ...... ——1,263 — 1,263 Dividends paid...... ———(23,108) (23,108) At 31 May 2004 ...... 10,000 8,056 (1,828) 1,816 18,044

The whole profit of Xtb is distributed as dividends to the main shareholder due to a profit transfer agreement.

23 Financial commitments At 31 May 2004 future aggregate minimum lease payments under non-cancellable operating leases were as follows:

B’000 Operating leases: land and buildings Within one year...... 4,976 Later than one year and less than five years...... 19,869 Later than five years...... 16,652 Operating leases: other Within one year...... 248 Later than one year and less than five years...... 223

Xtb’s most significant lease is that of the premises in Frankfurt. The lease expires in June 2013.

173 XCHANGING TRANSACTION BANK GMBH Notes to the financial information (Continued)

24 Cash flow from operating activities Reconciliation of operating profit to cash generated from operating activities

Period ended 31 May 2004 B’000 Operating profit ...... 2,728 Adjustment for non-cash items: Depreciation ...... 781 Profit on disposal of property, plant and equipment...... (381) Amortisation of intangibles ...... 224 3,352 Changes in working capital Increase in trade and other receivables...... (995) Increase in payables...... 24,806 Decrease in pensions...... (59,758) Decrease in provisions...... (10,705) Cash used by continuing operations...... (43,300)

25 Retirement benefit obligations Xtb defined benefit scheme Xtb operates a number of defined benefit plans, which collectively form the Xtb defined benefit scheme, for retirement payments which guarantee defined payments to its employees when they have reached the retiring age. In the most recent actuarial valuation of the Xtb pension plan, the principal assumptions made by the actuaries were:

Period ended 31 May 2004 % Rate of increase in pensionable salaries...... 3.0 Rate of increase in pensions in payment and deferred pensions ...... 2.0 Discount rate ...... 5.5 Expected return on plan assets...... 0.0 The expected return on plan assets reflects the average rate of earnings expected on the funds invested or to be invested to provide benefits. As there were no funds invested at the start of the period, this is nil. The expected long term rate of return on plan assets is used (with the market related value of assets) to compute the expected return on assets. The mortality table used in the scheme is Richttafeln 1998 G, Heubeck-Richttafeln GmbH, Koln¨ 1998. Under these assumptions, the life expectancy for a male current pensioner at age 65 is 16 years and for a male future pensioner at age 65 is 16 years. Employees do not contribute to the scheme. At 31 May 2004 it covered 1,333 employees and surviving dependents of which 976 employees were entitled to receive a pension at the retirement age of 65 years, 225 employees qualified for early retirement and 24 employees for part-time retirement and were entitled to receive a pension at the age of between 60 and 63 depending on individual circumstances, 99 pensioners and 9 surviving dependents were recipients of a pension. The retirement benefit consists of pension payments. The pension amount depends on salary, age and number of years in employment at Xtb. The entitlement to a pension depends on legal regulations. Up to the end of 2005 employees had to work for the company for 10 years and reach the age of 35 in order to qualify for these vested benefits. From 1 January 2006 this was changed to a working period of 5 years and the age of 30 in order to qualify. There were no changes in legislation or other regulations during the period from 1 January 2004 to 31 May 2004. The funding policy for the scheme was to invest the cash equivalent into a pension fund rather than holding it as cash.

174 XCHANGING TRANSACTION BANK GMBH Notes to the financial information (Continued)

The weighted average asset allocations of the fair value of the total plan assets in the defined benefit section of the scheme were:

Period ended 31 May 2004 % Equities...... 14.98 Bonds and gilts...... 69.20 Other...... 15.82 Total...... 100.00

The retirement benefit obligation recognised in the balance sheet is:

31 May 2004 B’000 Present value of funded obligations ...... (61,637) Fair value of plan assets...... 57,842 Net deficit recognised in the balance sheet ...... (3,795)

The amounts recognised in the income statements are as follows:

Period ended 31 May 2004 B’000 Current service cost ...... 972 Interest cost ...... 1,315 Expected return on plan assets...... — Total included within staff costs (note 8)...... 2,287 Included within: Administrative costs...... 972 Finance costs...... 1,315 2,287

The amounts recognised in the statement of recognised income and expense are as follows:

Period ended 31 May 2004 B’000 Net actuarial losses recognised during the period ...... 3,091

Analysis of the movement in the present value of the defined benefit obligation Period ended 31 May 2004 B’000 Present value of obligation in scheme as at 1 January...... (60,279) Current service cost ...... (972) Interest cost ...... (1,315) Actuarial losses...... (2,232) Benefits paid...... 782 Curtailments...... 2,379 Present value of obligation in scheme as at 31 May ...... (61,637)

175 XCHANGING TRANSACTION BANK GMBH Notes to the financial information (Continued)

Analysis of the movement in the fair value of the plan assets Period ended 31 May 2004 B’000 Fair value of scheme assets as at 1 January...... — Contributions by plan participants ...... 58,700 Actuarial losses...... (859) Fair value of scheme assets as at 31 May...... 57,841 Actual return on plan assets...... (859)

Defined contribution scheme The contribution plan covers employees within the financial industry. The assets of these funds are held within an external pension fund. Pension costs that were charged to the income statement for the period relating to current contributions were A590,000.

26 Ultimate controlling party Xtb was 100% owned by Deutsche Bank in the period from 1 January to 31 May 2004.

27 Related party transactions Deutsche Bank is considered to be a related party as it holds a 100% shareholding of Xchanging Transaction Bank GmbH in the period to 31 May 2004. Sal. Oppenheim jr. & Cie KGaA is considered to be a related party for this financial information as from June 2005 it held a 5% shareholding in Xchanging etb GmbH, which from June 2004 was the 100% parent of Xtb. A description of the nature of the services provided by/to Deutsche Bank and Sal. Oppenheim and the amount receivable/(payable) in respect of each at 31 May 2004 are set out in the table below: Sales/ Year end (purchases) receivables/ Period ended (payables) 31 May 31 May Services provided by/to Xtb 2004 2004 B’000 B’000 Securities processing services ...... 41,466 1,194 Property charges...... (3,159) IT charges ...... (17,700) (21,277) Other operating expenses ...... (1,248) { Interest on current accounts...... 1,361 169 Current accounts ...... — 85,127 The members of the Xtb directors’ board are: Bernd Sperber, Achim Pohler¨ and Gunter¨ Wolfertz. The members of the Xtb supervisory board are: Hermann-Josef Lamberti, Deutsche Bank Siegfried Heger, Xtb Ingo Herzog, Xtb Guido Heuveldop, Deutsche Bank Friedrich Carl Janssen, Sal. Oppenheim Peter Scharpf, Verband der Sparda-Banken e.V.

176 XCHANGING TRANSACTION BANK GMBH Notes to the financial information (Continued)

28 Financial instruments and capital requirements Financial instruments The main financial instruments are the investment funds which in the balance sheet are shown netted against the pension liability, the cash position held with Deutsche Bank and trade receivables and trade payables shown within loans and receivables on the balance sheet. Trade receivables are shown at nominal value. Xtb does not hold any financial assets or liabilities at fair value through profit and loss nor was Xtb engaged in any kind of financial trading. The maximum credit risk is A89,495,000 as at 31 May 2004.

Capital requirements As a bank Xtb has to comply with the banking supervisory capital requirements according to the German Banking Act (Kreditwesengesetz, ‘‘KWG’’). In order to comply with the capital requirements the calculation to establish if sufficient capital is held was performed on a monthly basis and reported to the BaFin (German Banking Supervisory Authority). For the purpose of this calculation, the liable capital is smaller than the balance sheet capital as all intangible assets are deducted from the balance sheet capital to determine the liable capital. During the period the capital requirements have always been fulfilled. The only capital components are the nominal capital and the capital reserve. There are no subordinated debts that would count as capital.

29 Post balance sheet events On 1 June 2004, Xtb was purchased by Xchanging etb GmbH. On 18 October 2004, the year end was changed from 31 May 2005 to 31 December 2004, due to the above change of ownership. A profit transfer agreement, whereby the whole profit of Xchanging Transaction Bank GmbH for an accounting period is transferred to its parent, was entered into with Xchanging etb GmbH via shareholders’ resolution on 18 October 2004 and entry into the register on 18 November 2004.

177 PART 5: ACCOUNTANTS’ REPORTS AND FINANCIAL INFORMATION

SECTION C – ACCOUNTANTS’ REPORT AND FINANCIAL INFORMATION FOR XCHANGING PLC FOR THE FINANCIAL PERIOD FROM ITS INCORPORATION ON 16 MAY 2006 TO 31 DECEMBER 2006

15FEB200619332872

PricewaterhouseCoopers LLP 1 Embankment Place London WC2N 6RH The Directors Xchanging plc 34 Leadenhall Street London EC3A 1AX Citigroup Global Markets Limited (the ‘‘Sponsor’’) Citigroup Centre Canada Square Canary Wharf London E14 5LB

25 April 2007

Dear Sirs

Xchanging plc Introduction We report on the special purpose financial information set out in Section C of Part 5: Accountants’ Reports and Financial Information. This special purpose financial information has been prepared for inclusion in the prospectus dated 25 April 2007 (the ‘‘Prospectus’’) of Xchanging plc (the ‘‘Company’’) on the basis of the accounting policies set out in note 2. This report is required by item 20.1 of Annex 1 to the PD Regulation and is given for the purposes of complying with that item and for no other purpose.

Responsibilities The Directors of the Company are responsible for preparing the special purpose financial information in accordance with International Financial Reporting Standards as adopted by the European Union. It is our responsibility to form an opinion on the financial information as to whether the special purpose financial information gives a true and fair view, for the purposes of the Prospectus and to report our opinion to you. Save for any responsibility which we may have to those persons to whom this report is expressly addressed and for any responsibility arising under item 5.5.3R(2)(f) of the Prospectus Rules to any person as and to the extent there provided, to the fullest extent permitted by law we do not assume any responsibility and will not accept any liability to any other person for any loss suffered by any such other person as a result of, arising out of, or in connection with this report, consenting to its inclusion in the Prospectus.

178 15FEB200619332872

Basis of opinion We conducted our work in accordance with Standards for Investment Reporting issued by the Auditing Practices Board in the United Kingdom. Our work included an assessment of evidence relevant to the amounts and disclosures in the financial information. It also included an assessment of significant estimates and judgments made by those responsible for the preparation of the special purpose financial information and whether the accounting policies are appropriate to the Company’s circumstances consistently applied and adequately disclosed. We planned and performed our work so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial information is free from material misstatement, whether caused by fraud or other irregularity or error. Our work has not been carried out in accordance with auditing standards generally accepted in the United States of America or auditing standards of the Public Accounting Oversight Board (United States) and accordingly should not be relied upon as if it had been carried out in accordance with those standards.

Opinion In our opinion, the financial information gives, for the purposes of the Prospectus, a true and fair view of the state of affairs of the Company as at the date stated and of its profits, cash flows and statement of recognised income and expense for the period then ended in accordance with International Financial Reporting Standards as adopted by the European Union.

Declaration For the purposes of Prospectus Rule 5.5.3R(2)(f) we are responsible for this report as part of the Prospectus and declare that we have taken all reasonable care to ensure that the information contained in this report is, to the best of our knowledge, in accordance with the facts and contains no omissions likely to affect its import. This declaration is included in the Prospectus in compliance with item 1.2 of Annex I of the PD Regulation.

Yours faithfully

PricewaterhouseCoopers LLP Chartered Accountants

179 XCHANGING PLC Balance Sheet – 31 December

Notes 2006 £’000 Assets Current assets Amounts owed by related parties ...... 5 50 Net current assets ...... 50 Net assets ...... 50

Shareholders’ equity Ordinary shares...... 6 50 Total equity...... 6 50

180 XCHANGING PLC Statement of changes in shareholders’ equity

Period from 16 May to Share 31 December Notes capital 2006 £’000 £’000 Balance as at 16 May 2006, on incorporation...... —— Issue of share capital ...... 6 50 50 Total changes in shareholders’ equity...... 50 50 Balance as at 31 December 2006 ...... 50 50

181 XCHANGING PLC Notes to the financial information

1 General information Xchanging plc was incorporated on 16 May 2006 and did not trade from the period of incorporation to 31 December 2006. On 31 July 2006 the Company entered into the conditional Takeover Offer Agreement with Xchanging B.V. and certain of its shareholders, which sets out the terms on which those shareholders of Xchanging B.V. will exchange their shares in Xchanging B.V. for shares in the Company on Admission becoming effective. For details of the Takeover Offer Agreement and the associated Employee Offer Letters please refer to paragraphs 18.9 and 18.10 of Part 8: Additional Information.

2 Principal accounting policies The principal accounting policies applied in the preparation of this financial information are set out below.

(a) Basis of preparation of the financial information This financial information has been prepared in accordance with EU endorsed International Financial Reporting Standards, IFRIC interpretations and with those parts of the Companies Act applicable to companies reporting under IFRS. The financial information has been prepared under the historical cost convention. A summary of the accounting policies is set out below.

(b) Cash and cash equivalents Cash and cash equivalents include cash in hand, demand deposits and short term highly liquid investments which are readily convertible to cash and are subject to minimal risk of changes in value.

(c) Share capital Share capital comprises the nominal value of all issued shares. On subscribing for shares any excess consideration over the nominal value of the shares issued less any issue costs is credited to the share premium account.

3 Directors’ emoluments The directors did not receive any emoluments in respect of their role as directors of the Company.

4 Employees The Company did not have any employees.

5 Amounts owed by related parties General Atlantic Partners (Bermuda) L.P., which is a related party by virtue of its shareholding in the Company, has provided an unconditional undertaking to pay up in full the amounts owed on its shares being £49,998.

182 XCHANGING PLC Notes to the financial information (Continued)

6 Called up share capital

2006 £’000 Authorised 49,998 redeemable preference shares of £1 each...... 50 50,000 ordinary shares of £1 each ...... 50 100 Alloted, called up and fully paid 49,998 redeemable preference shares of £1 each...... 50 2 ordinary shares of £1 each ...... — 50

The Company was incorporated with £50,000 authorised share capital, comprising of 50,000 ordinary shares of £1 each. Two ordinary shares were allotted on incorporation for £2 cash. On 27 June 2006 the authorised share capital was increased by £49,998 by the creation of 49,998 redeemable preference shares of £1 each. All of these redeemable preference shares were issued on 27 June 2006 in exchange for an unconditional undertaking to pay the subscription amounts in full. The shares are considered fully paid up as to the nominal value.

Share rights The redeemable preference shares do not carry any rights to dividends or voting rights. The ordinary shares are subordinate to the redeemable preference shares in event of liquidation or winding up.

7 Post balance sheet events Since the balance sheet date the following activities have taken place: Xchanging plc acquired the entire share capital of Xchanging Holdings Limited on 23 April 2007 as described in paragraph 3.10 of Part 8: Additional Information. At the annual general meeting of the Company held on 23 April 2007 the shareholders resolved that: each issued and unissued ordinary share of £1 each be subdivided into 20 ordinary shares of 5p each; the redeemable preference shares, subject to them being redeemed, be cancelled; and the authorised share capital of the Company be increased to £17,500,000 by the creation of an additional 349,000,000 ordinary shares of 5p each.

183 PART 6: UNAUDITED PRO FORMA FINANCIAL INFORMATION

PricewaterhouseCoopers LLP 1 Embankment Place London WC2N 6RH2NOV200423333498 The Directors Xchanging plc 34 Leadenhall Street London EC3A 1AX

Citigroup Global Markets Limited (the ‘‘Sponsor’’) Citigroup Centre Canada Square CanaryWharf London E14 5LB

25 April 2007

Dear Sirs

Xchanging plc (the ‘‘Company’’) We report on the pro forma net assets statement (the ‘‘Pro forma net assets statement’’) set out in Part 6: Unaudited Pro Forma Financial Information of the Company’s prospectus dated 25 April 2007 (the ‘‘Prospectus’’) which has been prepared on the basis described, for illustrative purposes only, to provide information about how the proposed Global Offer, the acquisition of the Xchanging B.V. group and other consequential items might have affected the financial information presented on the basis of the accounting policies adopted by the Company in preparing the financial statements for the period ending 31 December 2006. This report is required by item 7 of Annex II to the PD Regulation and is given for the purpose of complying with that PD Regulation and for no other purpose.

Responsibilities It is the responsibility of the directors of the Company to prepare the Pro forma net assets statement in accordance with item 20.2 of Annex I to the PD Regulation. It is our responsibility to form an opinion, as required by item 7 of Annex II to the PD Regulation on the Pro forma net assets statement as to the proper compilation of the Pro forma net assets statement and to report our opinion to you. In providing this opinion we are not updating or refreshing any reports or opinions previously made by us on any financial information used in the compilation of the Pro forma net assets statement, nor do we accept responsibility for such reports or opinions beyond that owed to those to whom those reports or opinions were addressed by us at the dates of their issue.

184 15FEB200619332872

Save for any responsibility which we may have to those persons to whom this report is expressly addressed and for any responsibility arising under item 5.5.3R(2)(f) of the Prospectus Rules to any person as and to the extent there provided, to the fullest extent permitted by law we do not assume any responsibility and will not accept any liability to any other person for any loss suffered by any such other person as a result of, arising out of, or in connection with this report or consenting to its inclusion in the Prospectus.

Basis of opinion We conducted our work in accordance with the Standards for Investment Reporting issued by the Auditing Practices Board in the United Kingdom. The work that we performed for the purpose of making this report, which involved no independent examination of any of the underlying financial information, consisted primarily of comparing the unadjusted financial information with the source documents, considering the evidence supporting the adjustments and discussing the Pro forma net assets statement with the directors of the Company. We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with reasonable assurance that the Pro forma net assets statement has been properly compiled on the basis stated and that such basis is consistent with the accounting policies of the Company. Our work has not been carried out in accordance with auditing standards or other standards and practices generally accepted in the United States of America or auditing standards of the Public Company Accounting Oversight Board (United States) and accordingly should not be relied upon as if it had been carried out in accordance with those standards and practices.

Opinion

In our opinion: (a) the Pro forma net assets statement has been properly compiled on the basis stated; and (b) such basis is consistent with the accounting policies of the Company.

Declaration For the purposes of Prospectus Rule 5.5.3R(2)(f), we are responsible for this report as part of the Prospectus and we declare that we have taken all reasonable care to ensure that the information contained in this report is, to the best of our knowledge, in accordance with the facts and contains no omission likely to affect its import. This declaration is included in the Prospectus in compliance with item 1.2 of Annex I and item 1.2 of Annex III to the PD Regulation.

Yours faithfully

PricewaterhouseCoopers LLP Chartered Accountants

185 Unaudited IFRS Pro forma financial information Set out below is unaudited pro forma financial information based on the net assets of Xchanging B.V. as at 31 December 2006. The pro forma is prepared for illustrative purposes only to show the effects of the Global Offer, the Acquisition, and other consequential items as detailed in notes 2, 3, 4 and 5 below, on the Group as if they had occurred on 31 December 2006. Due to its nature, the pro forma financial information represents a hypothetical situation, and therefore, does not represent the Group’s actual financial position or results. The unaudited IFRS pro forma financial information has been compiled from the IFRS balance sheets of Xchanging plc as at 31 December 2006 and Xchanging B.V. Group as at 31 December 2006, as set out in Sections A and C of Part 5: Accountants’ Reports and Financial Information, adjusted as described in notes 3 to 5 below.

Adjustments Note 2 Note 1 Xchanging Xchanging plc B.V. Group Pro forma as at as at as at 31 December 31 December 31 December 2006 2006 Note 3 Note 4 Note 5 2006 £’000 £’000 £’000 £’000 £’000 £’000 Assets Non-current assets Goodwill ...... 29,362 ——— 29,362 Intangible assets ...... — 28,471 ——— 28,471 Property, plant and equipment ...... — 15,096 ——— 15,096 Available-for-sale financial assets ... — 20,441 ——— 20,441 Trade and other receivables ...... — 6,115 ——— 6,115 Deferred income tax assets...... — 16,317 ——— 16,317 — 115,802 ——— 115,802 Current assets Trade and other receivables ...... 50 74,976 ——(50) 74,976 Cash and cash equivalents...... — 58,684 1,576 65,000 — 125,260 50 133,660 1,576 65,000 (50) 200,236 Liabilities Current liabilities Trade and other payables...... — (80,902) ——— (80,902) Current income tax liabilities ...... — (7,129) ——— (7,129) Borrowings ...... — (3,270) ——— (3,270) Provisions ...... — (8,720) ——— (8,720) Net current assets...... 50 33,639 1,576 65,000 (50) 100,215 Total assets less current liabilities. 50 149,441 1,576 65,000 (50) 216,017 Non-current liabilities Trade and other payables...... — (9,764) ——— (9,764) Financial liabilities — Borrowings...... — (13,042) 13,042 —— — — Other liabilities ...... — (7,140) ——— (7,140) Deferred income tax liabilities...... — (2,517) ——— (2,517) Retirement benefit obligations...... — (21,901) ——— (21,901) Provisions ...... — (9,447) ——— (9,447) — (63,811) 13,042 —— (50,769) Net assets...... 50 85,630 14,618 65,000 (50) 165,248

Notes: 1. Information on Xchanging plc has been extracted, without adjustment from the IFRS historical financial information for Xchanging plc set out in Section C of Part 5: Accountants’ Reports and Financial Information. Xchanging plc will become the immediate listed entity of the Xchanging group on Admission.

In contemplation of and in connection with the Global Offer the following adjustments have been made: 2. Information on Xchanging B.V. has been extracted, without adjustment, from the group IFRS historical financial information set out in Section A of Part 5: Accountants’ Reports and Financial Information.

186 3. Receipt of US$2,212,301 (which for the purposes of this pro forma has been translated at the average US$:£ exchange rate for the period 1 January 2007 to 31 March 2007 of 1.95449 to £1,131,907) and £443,712 proceeds on exercise of the BAE Warrant and the debt/equity swap of the full outstanding amount of £13,402,000 owed under the Rebus loan for shares in Xchanging B.V. as described in paragraphs 3.8 and 3.9 in Part 8: Additional Information. 4. Receipt of net proceeds of the Global Offer of £65 million, being gross proceeds of £75 million less fees of £10 million (assuming that the full discretionary fee is paid to the Underwriters) as described in Part 3: The Global Offer. 5. Redemption of the preference shares issued on 27 June 2006 as described in paragraph 3.5.3 in Part 8: Additional Information. 6. No adjustment has been made for the purchase by the Xchanging Group of the XHRS and XPS minority interests. 7. No adjustment has been made for trading activity since 31 December 2006. 8. There was no deferred tax adjustment in respect of the above adjustments. 9. This pro forma financial information does not constitute statutory accounts within the meaning of section 240 of the Companies Act.

187 PART 7: REGULATION 1. REGULATED ENTITIES IN THE GROUP Certain entities in the Group are subject to regulation in the UK and Germany in respect of the insurance intermediation and banking activities which they carry on. It should be noted that the regulations described in paragraphs 1.1 and 1.2 of this Part 7: Regulation are generally designed to protect policyholders and customers of the regulated firms rather than investors.

1.1 UNITED KINGDOM 1.1.1 Regulatory Following the implementation of the EU Insurance Mediation Directive, since 14 January 2005 UK incorporated insurance intermediaries have been subject to regulation by the FSA under FSMA. XITS is an insurance intermediary which is authorised and regulated by the FSA under FSMA. XITS is authorised to carry on the regulated insurance intermediation activities of arranging (bringing about) deals in non-investment insurance contracts and agreeing to carry on this regulated activity. XITS is not authorised to hold client money and its capital resources requirement is set accordingly at 2.5% of its annual income from its regulated insurance intermediation activities. XBS submitted an application to the FSA on 20 December 2006 for authorisation to carry on regulated insurance intermediation activities relating to the EP entered into with Aon. These are the activities of arranging (bringing about) deals in non-investment insurance contracts, assisting in the administration and performance of a non-investment insurance contract and agreeing to carry on these regulated activities. XBS does not intend to hold client money and it is therefore anticipated that XBS’s capital resources requirement will be set at 2.5% of its annual income from its regulated insurance intermediation activities. As an interim measure pending XBS’s authorisation, Aon has appointed XBS as its appointed representative under FSMA to carry on the above-mentioned insurance intermediation activities. The ability of XITS (and XBS when authorised) to conduct its business depends on compliance with applicable legal and regulatory requirements. In the UK, these requirements cover such areas as: prudential supervision, as set out in the Prudential Sourcebook for Mortgage and Home Finance Firms, and Insurance Intermediaries (‘‘MIPRU’’). These rules require insurance intermediaries to take out and maintain sufficient professional indemnity insurance and to maintain adequate capital resources and to ensure that they are able to meet their liabilities as they fall due; internal systems and controls and an approved persons regime, whereby the FSA must approve persons carrying on certain key functions identified by the relevant rules; high level requirements in the FSA’s Principles for Business; reporting; and requirements as to the conduct of business with customers. Failure to comply with the relevant legal and regulatory requirements could lead to disciplinary action (including public statements and censures and/or financial penalties), requirements to provide redress or restitution, an individual being prohibited from carrying out specified functions, a variation of permission or ultimately the revocation of an authorisation. Breaches of certain FSA rules by an authorised firm may also give a private person that suffers loss as a result of the breach a right of action against the authorised firm for damages. The FSA has wide powers under FSMA, particularly powers of intervention and investigation. The FSA has the power to require an authorised firm to provide specified information or produce specified documents reasonably required by the FSA in connection with the exercise of its functions under FSMA. The FSA may also require the authorised firm (or any member of its

188 group) to provide the FSA with a report (prepared by a person nominated or approved by the FSA) on any matter in relation to which it has required or could require information or production of documents. 1.1.2 Change in Control Regime In the UK, the FSA regulates the acquisition of control over UK authorised firms. The prior approval of the FSA is required of any person proposing to acquire control of a UK authorised person under Part XII of FSMA. For these purposes, a person acquires control over a UK insurance intermediary if such person holds 20% or more of the shares in a UK insurance intermediary or its parent, or is entitled to exercise or control the exercise of 20% or more of the voting power at general meetings of the UK insurance intermediary or its parent. Accordingly, any person who alone, or together with any associates, proposes to acquire 20% or more of the shares in Xchanging plc would become a controller of XITS and would require prior approval of the FSA. The FSA has up to three months from the date on which it receives the notification either to approve the proposal or to object to the proposal. Such approval may be unconditional or subject to such conditions as the FSA considers appropriate. If this three month period expires and the FSA has not objected to the proposal, approval is deemed to be given. In considering whether to grant or withhold its approval to the proposal, the FSA must be satisfied both that the acquirer is a fit and proper person to have control over the UK authorised firm and that the interests of consumers would not be threatened by its acquiring control. Where approval is granted, subsequent notification of the relevant change in control must be made to the FSA when the person actually acquires control. The acquisition of control (including by way of a transfer of shares or acquiring a right to be issued shares) or reduction of control in breach of the notification requirements contained in FSMA is a criminal offence. In addition, where shares are acquired in contravention of a notice of objection from the FSA or a condition imposed on an approval, the FSA has certain powers to declare the transfer of shares void to prevent the exercise of voting rights or the payment of dividends in relation to those shares. 1.1.3 Regulatory Changes in the United Kingdom and at a European Level relevant to Insurance Intermediation The FSA has restructured its Handbook in relation to prudential standards (largely as a consequence of implementing the Capital Requirements Directive). With effect from 1 January 2007, the FSA Handbook now includes a separate sourcebook, MIPRU, governing prudential requirements for insurance intermediaries, mortgage and home finance firms. Other recent and future regulatory developments in the insurance intermediation sector that may affect XITS and XBS include: (a) Contract certainty In December 2004, the FSA challenged firms conducting general insurance business to find a solution to the issue of contract certainty (i.e. achieving complete and final agreement of all terms in insurance contracts before the inception of risk under them). From December 2006, the FSA expects all such firms to be able to demonstrate that they are achieving contract certainty, which includes having in place systems and controls to support data collection and to capture information on any contracts not achieving contract certainty. They must also take steps to address the legacy issue (i.e. contracts of insurance previously entered into without any terms or policy having been issued to the customer). The FSA has stated that contract certainty is a supervisory priority for 2007 and any firms falling behind the rest of the market will be subject to the full range of regulatory sanction, including where necessary consideration of enforcement action. A small proportion of document validation services carried on by one entity in the Group has moved to a pre-inception and pre-bind basis and is now undertaken by XITS, away from post-bind which, before the advent of the FSA’s contract certainty challenge to the market, was the norm for Lloyd’s and the London market.

189 (b) EU inquiry into the Business Insurance Sector On 13 June 2005, the European Commission (the ‘‘Commission’’) launched two EU-wide Financial Markets sector investigations pursuant to Article 17 of Regulation 1/2003, specifically into the business insurance and retail banking sectors. The business insurance sector inquiry (the ‘‘Inquiry’’) aims at providing the Commission with a better understanding of the functioning of the sector, which would allow the Commission to detect distortions of competition that, where appropriate, could then be tackled through antitrust enforcement, either by the Commission or by Member States’ competition authorities. The Inquiry has focused on the following five areas: financial aspects of the business insurance sector; duration of contracts in the business insurance sector; reinsurance; structure, function and remuneration of distribution channels; and horizontal co-operation among insurers. In January 2007, the Commission published an interim report in respect of the Inquiry (the ‘‘Interim Report’’). The Commission’s main concerns raised in the Interim Report in respect of its examination of distribution channels include: the potential conflict of interest where brokers act both as adviser to their customers and also as a distribution channel for the insurer, often with underwriting powers and binding authorities; conflicts of interest relating to the remuneration of intermediaries including the use of contingent commissions. A contingent commission is very broadly a payment made by an insurer to an intermediary based on the achievement of agreed targets, relating to the business placed by the intermediary with that insurer. The Commission is focusing on the issue of contingent commissions following the ‘‘Spitzer’’ investigation in the United States and intends to examine this issue further; the overall lack of transparency of intermediaries’ remuneration, which the Commission intends to examine further; and insurers prohibiting brokers from rebating commission, another issue which the Commission intends to examine further. The Commission intends to conduct an additional targeted round of investigative steps with various stakeholders. The Commission also launched a public consultation on the various issues raised in its Interim Report, which ended on 10 April 2007. On 9 February 2007 a public hearing took place in Brussels to discuss the Interim Report. The final report of the Inquiry is scheduled to be published in the summer of 2007. The Commission may propose regulatory changes to deal with the issues raised in the Inquiry and it may bring individual competition enforcement proceedings for breaches of Articles 81 and 82 of the EC Treaty. A breach of Article 81 or 82 can lead to the imposition of serious penalties, including fines of up to 10% of worldwide turnover as well as a requirement that the prohibited conduct cease. Prior to the publication of the final report relating to the Inquiry, it is difficult for the directors to predict the impact of this investigation on XITS and XBS. It is possible that the Inquiry could result in the introduction of changes to the regulation of conflicts of interests and remuneration as regards insurance intermediaries. To the extent that such changes apply solely to insurance intermediaries which advise insureds on insurance policies while acting as a distribution channel for insurers under those policies for a commission from those insurers, it is likely that XITS and XBS would fall outside the scope of such regulatory changes. However, to the extent that any changes to the regulation of conflicts of interests and remuneration have a wider application and apply to other insurance intermediaries (in addition to insurance intermediaries which advise insureds on insurance policies while acting as a distribution channel for insurers under those policies for a commission from those insurers), such regulatory changes could potentially affect XITS and XBS. In this case, such regulatory changes could result in an increase in XITS’ and XBS’ compliance costs and greater disclosure being required by XITS and XBS. (c) Financial Services Compensation Scheme (the ‘‘FSCS’’) The FSA has set out proposals in a consultation paper published in March 2007 (the ‘‘Consultation Paper’’) to reform the funding of the FSCS. The FSCS is the UK’s statutory fund of last resort that pays compensation to a consumer where they have a valid claim against an FSA authorised firm that is unable, or likely to be unable to pay claims against it.

190 The publication of the Consultation Paper has highlighted that the FSA is proposing that regulated wholesale firms (firms which do not deal with consumers) should make a new separate and explicit contribution to the compensation costs of the FSCS. The FSA’s proposals at this stage are broadly to make it possible to have recourse to the regulated wholesale sector for a proportionate contribution to the funding of the FSCS only if a catastrophic event has occurred and if the funding from regulated firms undertaking retail business has been exhausted. The FSA intends to consult further on the proposals in respect of funding by the wholesale sector later on this year in a FSCS Funding Review Supplementary consultation paper. The FSA does not envisage its proposals being implemented before 1 April 2009. Assuming the FSA’s proposals for funding by the wholesale sector are implemented, this would result in an increase in XITS’ and XBS’ costs of being in business.

1.2 GERMANY 1.2.1 Principal laws and regulators Xtb is a German credit institution subject to supervision and regulation by German supervisory authorities, namely the German Financial Markets regulator, the Federal Financial Markets Supervisory Authority (Bundesanstalt fur¨ Finanzdienstleistungsaufsicht, ‘‘BaFin’’), and the German central bank (Deutsche Bundesbank, ‘‘Bundesbank’’). Xtb is licenced to conduct banking business in accordance with the KWG. The KWG contains the principal rules for German banking supervision, including the requirements for a banking licence, and also regulates the general business activities, organisational requirements (including internal audit and risk management) and capital adequacy of credit institutions. 1.2.2 Supervision by the BaFin The BaFin is authorised to issue regulations, circulars and publications implementing the provisions of the German banking laws and other laws affecting German banks. The main purpose of the German banking laws is to protect the soundness and proper working of the German banking system. The KWG also implements, or is the basis for implementing certain directives of the European Union relating to banks and certain recommendations on banking supervision issued by the Basle Committee on Banking Regulations and Supervisory Practices at the Bank for International Settlements (the ‘‘Basle Committee’’), including the Basle Committee’s report on International Convergence of Capital Measurement and Capital Standards: a Revised Framework published in June 2004 (‘‘Basle II’’). The Basle II rules and related EU directives have been implemented into German law by amending the KWG and by the new Solvability Regulation (Solvabilitatsverordnung¨ , ‘‘SolvV’’) which came into force on 1 January 2007 subject to certain transitional provisions. Xtb is currently implementing the Basel II banking regulation requirements regarding solvency and capital adequacy. Depending on the outcome of Xtb’s current internal risk assessment exercise, which is to be overseen by the regulator (BaFin), Xtb may require an additional capital injection in 2007 or 2008. Such an injection would need to be funded by Xtb shareholders in proportion to their holdings in Xtb. The Group may, therefore, be called upon to increase its level of committed investment in Xtb. The BaFin supervises the operations of German banks to ensure that they conduct their business in accordance with the provisions of the KWG and other applicable German laws and regulations. Particular emphasis is placed on compliance with capital adequacy and liquidity requirements, large exposure limits and restrictions on certain activities imposed by the KWG and the regulations issued thereunder. Following the merger of the three former German regulatory authorities into the BaFin, the BaFin is also the competent authority to monitor compliance with the rules of conduct and other matters including transaction reporting under the German Securities Trading Act (Wertpapierhandelsgesetz, ‘‘WpHG’’). In respect of the forthcoming implementation of the Markets in Financial Instruments Directive (‘‘MiFID’’) into German law (due to take place in November 2007), the scope of application of the WpHG will become much broader and the provisions relating to the rules of conduct, organisational requirements and transparency requirements will be revised and new requirements, such as best execution, will be enacted.

191 Organisational requirements will also include provisions on outsourcing and the documentation of services provided by third parties. 1.2.3 Supervision by the Bundesbank The BaFin carries out its supervisory role in close cooperation with the Bundesbank in its capacity as the German central bank. Even though the BaFin and the Bundesbank work closely together, the functions of the BaFin and the Bundesbank are distinct. While the authority to issue administrative orders (Verwaltungsakte) binding on banks is vested solely with the BaFin, the BaFin must consult with the Bundesbank before it issues regulations (Verordnungen) if the regulations affect the functions of the Bundesbank. This would be the case, for example, for regulations affecting capital adequacy and liquidity requirements. The Bundesbank is responsible for organising the collection and analysis of several statistics and reports relating to capital adequacy requirements, liquidity requirements and certain data from German banks. These statistics and reports are submitted to the regional offices (Hauptverwaltungen) of the Bundesbank responsible for the district in which the bank has its corporate seat. Xtb reports to the regional office based in Frankfurt am Main. Since the commencement of stage three of the European Economic and Monetary Union (‘‘EMU’’) on 1 January 1999, responsibility for monetary policy and control, including minimum reserve requirements, in those states that participate in the EMU, such as Germany, lies with the European Central Bank. 1.2.4 Capital adequacy and liquidity requirements German capital adequacy requirements relate to counterparty risk (Adressrisiko), operational risk (operationelles Risiko) and market risk (Marktrisiko) (including certain risk relating to option transactions). Counterparty risk and operational risk must be backed by modified available capital (modifiziertes verfugbares¨ Eigenkapital), whereas market risk can be backed by own funds, comprising modified available capital (not required for counterparty and operational risk) and tier III capital (Drittrangmittel). With respect to counterparty risk, each bank must maintain at the end of each business day a ratio of at least 8% between the modified available capital and its risk-weighted assets and other risk positions, including off-balance sheet items. The KWG and the SolvV provide for numerous detailed provisions as regards the calculation of the capital of banks and the relevant risk positions subject to capital adequacy requirements. Capital adequacy requirements must also be met on a consolidated basis by entire banking groups or financial conglomerates. Each bank must invest its funds in a manner that guarantees sufficient liquidity at all times. The KWG and the Liquidity Regulation (Liquiditatsverordnung¨ , ‘‘LiqV’’) establish certain liquidity requirements for credit institutions. According to the LiqV, the payment obligations of a credit institution are to be divided into four maturity periods and compared with the means of payment during the applicable maturity period. The liquidity of a credit institution is considered sufficient if its payment obligations during each relevant maturity period do not exceed its means of payment during such period. 1.2.5 Limitation on large exposures The KWG, together with the Large Exposure Regulation (Großkredit- und Millionenkreditverordnung), limits the concentration of credit risks through restrictions on large exposures (Großkredite) of banks and groups of institutions. A bank must report its large exposures to the Bundesbank and notify the BaFin and the Bundesbank if it exceeds certain thresholds. 1.2.6 Reporting requirements In order to enable the BaFin and the Bundesbank to monitor compliance with the KWG and other applicable legal requirements, and to obtain information on the financial condition of banks, BaFin and the Bundesbank require the filing of comprehensive information by German banks.

192 1.2.7 Enforcement of laws and regulations governing the supervision of banks; disclosure and audits To ensure that German banks fully comply with all applicable legal regulatory and reporting requirements, the BaFin requires every bank to have an effective internal auditing department adequate in size and quality and procedures for monitoring and controlling the bank’s activities. Further, each bank must establish a written plan of organisation which must set forth the responsibilities of its employees, its operating procedures and the lines of responsibility up to the bank’s management with respect to the bank’s activities. An internal audit department must examine compliance with this plan and these responsibilities and procedures. In order to secure compliance with the KWG and the regulations issued thereunder, the BaFin and the Bundesbank may require information and documents from a bank, and the BaFin may conduct investigations within a bank without having to give any particular reason. In addition, the BaFin may attend meetings of the bank’s supervisory board and of the bank’s shareholders and may require such meetings to be convened. If the BaFin discovers irregularities, it can impose a variety of sanctions. It can require the bank to dismiss managers or prohibit them from continuing their activities. If a bank’s own funds are insufficient or liquidity requirements are not met and these shortcomings are not corrected within a period set by the BaFin, it can prohibit or restrict the profit distributions or lending activities. 1.2.8 Deposit protection Under the German Deposit Protection and Investor Compensation Act (Einlagensicherungs- und Anlegerentschadigungsgesetz¨ ) each German bank must be a member of one of the statutory compensation funds licenced and supervised by the BaFin. Xtb is a member of the compensation fund administered by the Entschadigungseinrichtung¨ deutscher Banken GmbH. This compensation fund is responsible for collecting and managing the contributions of member banks and for satisfying any claims for compensation in accordance with the provisions of the Deposit Protection and Investor Compensation Act. Xtb is also a member of the deposit insurance fund of the Bundesverband deutscher Banken, a deposit insurance fund established voluntarily by the members of the Association of German Banks. Within the limits set under its statutes, the voluntary deposit insurance fund secures customer claims that, because of their amount and scope, are not covered by the Deposit Protection and Investor Compensation Act. 1.2.9 Supervision of investment services and of safe custody and securities settlement services Investment services are subject to the provisions of the WpHG and certain aspects of safe custody and securities settlement services are regulated by the German Safe Custody Act (Depotgesetz, ‘‘DepotG’’). The BaFin supervises the compliance with the WpHG and the DepotG. To the extent safe custody services are provided, the DepotG and the Requirements on the Proper Conduct of Safe Custody Business and the Settlement of Securities Delivery Obligations dated 21 December 1998 require in particular that the relevant assets are kept separate and provide for details regarding the monitoring of customers’ assets. 1.2.10 Money Laundering The German Money Laundering Act (Geldwaschegesetz,¨ ‘‘GwG’’) specifies certain identification and organisational requirements for credit institutions. Under the GwG, an identification requirement arises upon the beginning of a business relationship as well as upon the acceptance of any cash, securities or precious metals equal to or exceeding an amount of A15,000. According to the GwG, German credit institutions must designate a money laundering officer who has to act as contact person for the law enforcement authorities in the prosecution of money laundering operations and who is responsible for the enforcement of the GwG. Credit institutions must report suspicious transactions. Further requirements (including a number of publications by the BaFin) concern the organisation within a bank to combat money laundering, including threat analysis.

193 2. REGULATION APPLICABLE TO CUSTOMERS OF THE GROUP IN RELATION TO THE OUTSOURCING OF THEIR ACTIVITIES Customers of the Group, whose activities are regulated in the jurisdiction in which they are based, may be subject to regulation regarding the outsourcing of their activities to entities in the Group. For example: in the UK, a regulated firm which outsources certain of its functions must comply with a range of principles, rules and guidance and must notify the FSA before entering into any material outsourcing. The FSA’s rules and guidance cover matters such as the supervision of the discharge of outsourced functions by a service provider, systems and controls arrangements and paying due regard to the interests of customers and treating them fairly. A regulated firm is not able to contract out its regulatory obligations; under German law, a credit institution or a financial services institution which outsources certain of its functions is obliged to notify the BaFin of the outsourcing. According to applicable regulatory requirements, an outsourcing agreement must be entered into which, inter alia, ensures that the outsourced functions can still be supervised by the outsourcing institution and its regulators; and Where customers of the Group are subject to regulation under Section 404 of the Sarbanes Oxley Act 2002, they need to demonstrate that they have effective controls in place to protect their financial statements. In support of this, relevant areas of the Group provide independently audited SAS70 Type 2 reports which provide assurance to the Group’s customers that relevant key controls are in place and effective.

194 PART 8: ADDITIONAL INFORMATION 1. RESPONSIBILITY 1.1 The Company and the Directors accept responsibility for the information contained in this document. To the best of the knowledge of the Company and the Directors (who have taken all reasonable care to ensure that such is the case), the information contained in this document is in accordance with the facts and contains no omission likely to affect its import.

2. INFORMATION

2.1 The Company was incorporated in England and Wales on 16 May 2006 with registered number 5819018 under the Act as a public company limited by shares with the name Tabbyview PLC. 2.2 The Company changed its name to Xchanging plc on 27 June 2006. 2.3 The principal legislation under which the Company operates is the Act. The business of the Company and its principal activity, is to act as the ultimate holding company of the Group. 2.4 The registered office of the Company is at 34 Leadenhall Street, London EC3A 1AX (Tel. No. +44 (0) 20 7780 6999).

3. SHARE CAPITAL 3.1 The authorised, issued and fully paid share capital of the Company as at 31 December 2006 was as follows:

Authorised Issued and fully paid Number Amount (£) Nominal Value Number Amount (£) 99,998 shares £99,998 £1.00 each 50,000 divided into £50,000 2 ordinary shares of £1.00 each and 49,998 redeemable preference shares of £1.00 each 3.2 The authorised, issued and fully paid share capital of the Company immediately following Admission is expected to comprise of Shares as follows:

Authorised Issued and fully paid Number Amount (£) Nominal Value Number Amount (£) 350,000,000 £17,500,000 £0.05 each 205,578,408 10,278,920.40 3.3 On incorporation the authorised share capital of the Company was £50,000 divided into 50,000 ordinary shares of £1.00 each, of which one was issued nil paid to Clifford Chance Nominees Limited and one was issued nil paid to Clifford Chance Secretaries Limited, the subscribers to the Memorandum of Association. 3.4 Since incorporation there have been the following changes in the authorised and issued share capital of the Company: 3.4.1 to obtain the Company’s trading certificate pursuant to section 117 of the Act, the authorised share capital of the Company was increased on 27 June 2006 from £50,000 to £99,998 by the creation of 49,998 redeemable preference shares of £1.00 each, the terms of which provide for automatic redemption by the Company at par upon Admission, and 49,998 redeemable preference shares of £1.00 each were issued on that date for cash fully paid, against an undertaking by the subscriber to pay £49,998 to the Company on or before 30 September 2008; and 3.4.2 to insert the Company as the parent company of the Group, on 31 July 2006, the Company entered into a takeover offer agreement (the ‘‘Takeover Offer Agreement’’), details of which are set out in paragraph 18.9 of this Part 8: Additional Information. Under the terms of the Takeover Offer Agreement, shareholders of Xchanging B.V. (the previous holding company of the Group) agreed to exchange their shares in Xchanging B.V. for shares in the Company. The offer comprised in the Takeover Offer Agreement has since been extended to all other shareholders of Xchanging B.V. and has been accepted by them under the terms of

195 individual employee offer letters with Xchanging B.V. and the Company (the ‘‘Employee Offer Letters’’). In addition, employees holding options over shares in Xchanging B.V. under the Employee Share Plans have agreed to exchange their options for options of equivalent value over Shares under the terms of option rollover letters with Xchanging B.V. and the Company (the ‘‘Option Rollover Letters’’). 3.5 In anticipation of Admission, the shareholders of the Company resolved at the annual general meeting of the Company held on 23 April 2007 that: 3.5.1 each issued and unissued ordinary share of £1.00 be sub-divided into 20 ordinary shares of 5p each; 3.5.2 the authorised share capital of the Company be increased from £99,998 to £17,549,998 by the creation of an additional 349,000,000 ordinary shares of 5p each; 3.5.3 subject to the redemption of the redeemable preference shares of £1 each, the authorised share capital of the Company be reduced from £17,549,998 comprising of 350,000,000 Shares and 49,998 redeemable preference shares of £1 each to £17,500,000 comprising of 350,000,000 Shares; 3.5.4 in substitution for all existing authorities and/or powers, the Directors be generally and unconditionally authorised for the purposes of section 80 of the Act to exercise all powers of the Company to allot relevant securities up to an aggregate nominal amount of £17,499,998, such authority to expire on the earlier of 22 April 2012 and the conclusion of the annual general meeting of the Company held in 2012 (but the Company may make an offer or agreement which would or might require relevant securities to be allotted after the expiry of this authority and the Directors may allot relevant securities pursuant to that offer or agreement as if this authority has not expired) provided that, following Admission on 30 April 2007, or such later date, being not later than 30 June 2007, as the Directors may decide, the authority conferred on the Directors under this paragraph is restricted so that it will not be exercisable to the extent that the amount of the authorised but unissued share capital of the Company would exceed one-third of the issued share capital of the Company following Admission; 3.5.5 the report and accounts for the period ended 31 December 2006, together with the Directors’ reports and auditors reports on those accounts be approved; 3.5.6 PricewaterhouseCoopers LLP be reappointed as auditors to hold office from the conclusion of the meeting until the conclusion of the next general meeting of the Company at which accounts are laid and that the Directors be authorised to fix their remuneration; 3.5.7 each of the following be re-elected as a director: John Robins; David Andrews; Richard Houghton; Adele Browne; David Hodgson; Tom Tinsley; Nigel Rich; Stephen Brenninkmeijer; Dennis Millard; John Bramley; Johannes Maret; and Friedrich Carl Janssen; 3.5.8 the Company be authorised to: (i) make donations to EU political organisations, not exceeding £50,000 in aggregate; and (ii) incur EU political expenditure, not exceeding £50,000 in aggregate, in the period beginning on the date of the passing of this resolution and expiring on the earlier of 22 July 2008 and the conclusion of the annual general meeting of the Company held in 2008 provided that the combined aggregate amount of donations made and EU political expenditure incurred pursuant to this authority shall not exceed £50,000. Such authority shall extend to enable any such donation to be made or EU political expenditure to be incurred either by the Company or by its wholly owned subsidiary, Xchanging UK Limited. For the purposes of this resolution, ‘‘donation’’, ‘‘EU political organisation’’ and ‘‘EU political expenditure’’ have the meanings ascribed to them in Part XA of the Act; 3.5.9 the Directors be generally empowered pursuant to section 95 of the Act to allot equity securities within the meaning of section 94(2) of the Act for cash, pursuant to the authority referred to in paragraph 3.5.4 of this Part 8: Additional Information as if section 89(1) of the Act (statutory pre-emption rights) did not apply to such allotment, such power to expire on the earlier of 22 April 2012 and the conclusion of the annual general meeting of the Company held in 2012 (but the Company may make an offer or agreement which would or

196 might require equity securities to be allotted after the expiry of this power and the Directors may allot equity securities pursuant to such offer or agreement as if this power had not expired), provided that such authority be limited to: (a) the allotment of up to 37,500,000 ordinary shares of 5p each pursuant to the Global Offer; (b) the allotment of equity securities in connection with a rights issue, open offer or any other pre-emptive offer in favour of ordinary shareholders but subject to such exclusions as may be necessary to deal with fractional entitlements or legal or practical problems under any laws or requirements of any regulatory body in any jurisdiction; and (c) the allotment (other than pursuant to (a) and (b) above) of equity securities for cash up to an aggregate nominal amount equal to 5% of the issued share capital of the Company immediately following Admission. The power conferred on the Directors by the resolution set out in this paragraph 3.5.9 of Part 8: Additional Information shall also apply to a sale of treasury shares, which is an allotment of equity securities by virtue of section 94(3A) of the Act, but with the omission of the words ‘‘pursuant to the general authority conferred by the authority referred to resolution 4’’ (being the resolution set out in paragraph 3.5.4 of this Part 8: Additional Information); 3.5.10 conditional on Admission becoming effective, the Articles of Association be adopted in place of the existing articles of association; 3.5.11 conditional on Admission becoming effective, the Company be generally and unconditionally authorised to make one or more market purchases (within the meaning of section 163(3) of the Act) of Shares provided that: (a) the maximum aggregate number of Shares authorised to be purchased is 20,000,000; (b) the minimum price which may be paid for a Share is its nominal value; (c) the maximum price which may be paid for a Share is an amount equal to 105% of the average of the middle market quotations for a Share as derived from The London Stock Exchange Daily Official List for the five business days immediately preceding the day on which that Share is purchased; (d) this authority expires at the earlier of 22 July 2008 and the conclusion of the annual general meeting of the Company held in 2008; and (e) the Company may make a contract to purchase Shares under this authority before the expiry of the authority which will or may be executed wholly or partly after the expiry of the authority, and may make a purchase of Shares in pursuance of any such contract. 3.6 On Admission of the unissued share capital, a maximum of 22,766,236 Shares will be reserved for issue in respect of options and awards granted under the Company’s Employee Share Plans (details of which are set out in paragraph 8 of this Part 8: Additional Information). 3.7 The share capital history for Xchanging B.V. since 1 April 2004 is as set out below.

197 3.7.1 The authorised, issued and fully paid share capital of Xchanging B.V. as at 1 April 2004 was as follows:

Nominal Authorisedvalue Issued and fully paid Share Class Number Amount (E) per share (E) Number Amount (E) Convertible Preference Class A...... 19,500,000 A195,000.00 A0.01 19,031,250 A190,312.5 Convertible Preference Class B...... 4,826,255 A48,262.55 A0.01 4,826,255 A48,262.55 Convertible Preference Class C...... 20,000,000 A200,000.00 A0.01 0 A0.00 Convertible Preference ...... 11,151,189 A111,511.89 A0.01 0 A0.00 Class A Common...... 1,785,714 A17,857.14 A0.01 1,785,714 A17,857.14 Class B Common ...... 1,785,714 A17,857.14 A0.01 1,785,714 A17,857.14 Class C Common...... 1,785,715 A17,857.15 A0.01 1,785,715 A17,857.15 G Shares ...... 100,000 A1,000.00 A0.01 84,440 A844.40 Scheme A Shares...... 2,937,500 A29,375.00 A0.01 937,500 A9,375.00 Scheme B Shares ...... 126,000 A1,260.00 A0.01 126,000 A1,260.00 Common...... 53,581,245 A535,812.45 A0.01 3,836,681 A38,366.81 TOTAL ...... 117,579,332 E1,175,793.32 34,199,269 E341,992.69

3.7.2 On 21 April 2004, Xchanging B.V. bought back 3,333 G Shares from Wolf Peter Graeser, 3,333 G Shares from Michael Peine and 1,111 G Shares from John Benjamin at the nominal value of A0.01 each and a total purchase price of A77.77. 3.7.3 On 27 April 2004, Xchanging B.V. issued 15,556 Common Shares at an issue price rounded to A3.31 per share to Franz Knoblauch for consideration of A51,490.36 in accordance with the rules of the Unapproved Share Option Plan and pursuant to notice of exercise of options. 3.7.4 On 28 May 2004, Xchanging B.V. issued 62,500 Common Shares at an issue price rounded to A0.45 per share to David Rich-Jones for consideration of A28,125; 500 Common Shares at an issue price rounded to A1.03 per share to Sarah Stephenson for consideration of A515; 20,000 Common Shares at an issue price rounded to A1.15 per share to John Doherty for consideration of A23,000 and 25,000 Common Shares at an issue price rounded to A1.15 per share to Peter Rushton for consideration of A28,750 in accordance with the rules of the Approved Share Option Plan and pursuant to notices of exercise of options. 3.7.5 On 17 June 2004, Xchanging B.V. issued 28,267 Common Shares at an issue price rounded to A1.51 per share for 27,728 Common Shares for consideration of A41,869.28 and at an issue price rounded to A3.33 per share for 539 Common Shares for consideration of A1,794.87 to John Benjamin in accordance with the rules of the Approved Share Option Plan and pursuant to notice of exercise of options. 3.7.6 On 19 July 2004, Xchanging B.V. issued, at an issue price rounded to A3.28 per share, 6,167 Common Shares to Bernd Rausch for consideration of A20,220.36 in accordance with the rules of the Unapproved Share Option Plan and pursuant to notices of exercise of options and 25,277 Common Shares to Rajendra Pandhare for consideration of A82,878.23 in accordance with the rules of the Unapproved Share Option Plan in respect of 17,952 Common Shares and in accordance with the rules of the Approved Share Option Plan in respect of 7,325 Common Shares, both pursuant to notices of exercise of options. 3.7.7 On 25 August 2004, Xchanging B.V. issued 3,792 Common Shares at an issue price rounded to A3.31 per share to Anne Marie Elliott for consideration of A12,551.52; 4,979 Common Shares at an issue price rounded to A3.39 per share to Paul Leighton for consideration of A16,892.25 and 4,889 Common Shares at an issue price rounded to A3.30 per share to Daren Jonathan Briant for consideration of A16,121.48 in accordance with the rules of the Approved Share Option Plan and pursuant to notices of exercise of options. 3.7.8 On 25 October 2004, Xchanging B.V. bought back 3,333 G Shares for no valuable consideration from Dorothee Ritz. 3.7.9 On 9 December 2004, Xchanging B.V. issued 4,000 Common Shares, at an issue price rounded to A0.45 per share for 2,500 Common Shares and A1.03 per share for 1,500 Common Shares, to Louise Archer for consideration of A2,670; 4,310 Common Shares at an issue price rounded to A3.31 per share to John Doherty for consideration of A14,266.10; 10,000 Common Shares at an issue price rounded to A3.31 to Thomas Evans for consideration of A33,100; 500 Common Shares at an issue price rounded to A3.31 per share

198 to David Joseph for consideration of A1,655 and 46,875 Common Shares at an issue price rounded to A1.03 per share to Bryony Moore for consideration of A48,281.25 in accordance with the rules of the Approved Share Option Plan and pursuant to notices of exercise of options. 3.7.10 On 7 March 2005, following the increase in the authorised share capital of Xchanging B.V. to include 1,818,181 Convertible Preference Class D Shares, Xchanging B.V. issued 1,818,181 Convertible Preference Class D Shares to Sal. Oppenheim in consideration for the payment to Xchanging B.V. by Sal. Oppenheim of £10,000,000. 3.7.11 On 13 May 2005, Xchanging B.V. bought back 1,785,714 Class B Common Shares from David Andrews for consideration of £500,000. 3.7.12 On 1 June 2005, Xchanging B.V. issued 500 Common Shares at an issue price rounded to A3.33 per share to Adele Browne for consideration of A1,665; 62,500 Common Shares at an issue price rounded to A0.45 per share to Clive Buesnel for consideration of A28,125; 5,000 Common Shares at an issue price rounded to A3.39 per share to Hamish Coop for consideration of A16,950; 2,000 Common Shares at an issue price rounded to A3.33 per share to Mark Sherwood-Edwards for consideration of A6,660; 1,500 Common Shares at an issue price rounded to A3.33 per share to Anthony Gerrard for consideration of A4,995; 6,503 Common Shares at an issue price rounded to A3.31 per share to Peter Rushton for consideration of A21,524.93; 5,000 Common Shares at an issue price rounded to A3.33 per share to Neil Watkinson for consideration of A16,650 and 15,000 Common Shares at an issue price rounded to A1.15 per share for 5,000 Common Shares and at an issue price rounded to A1.46 per share for 10,000 Common Shares to Gary Whitaker for consideration of A20,350 in accordance with the rules of the Approved Share Option Plan and pursuant to notices of exercise of options. 3.7.13 On 24 November 2005, Xchanging B.V. issued 14,490 Common Shares at an issue price rounded to A3.30 per share to David Bauernfeind for consideration of A47,780.78; 14,087 Common Shares at an issue price rounded to A3.28 per share to Peter George for consideration of A46,189.86; 10,000 Common Shares at an issue price rounded to A3.28 per share to Nishil Khimasia for consideration of A32,790; 2,708 Common Shares at an issue price rounded to A5.75 per share to Nitin Singhal for consideration of A15,576.42; and 1,500 Common Shares at an issue price rounded to A3.34 per share to Sarah Stephenson for consideration of A5,002.50 in accordance with the rules of the Approved Share Option Plan and pursuant to notices of exercise of options. 3.7.14 On 23 December 2005, Xchanging B.V. issued 207 G Shares at an issue price rounded to A32.06 per share to Horst Maiwald for consideration of A6,637.04 in accordance with the rules of the Xchanging Group Unapproved G Share Option Plan and 5,000 Common Shares at an issue price rounded to A3.30 per share to Jorg¨ Brand for consideration of A16,490 in accordance with the rules of the Approved Share Option Plan pursuant to notices of exercise of options. 3.7.15 On 29 March 2006, Xchanging B.V. issued 1,820 Common Shares at an issue price rounded to A3.33 per share to David White for consideration of A6,060.60 in accordance with the rules of the Approved Share Option Plan and pursuant to notice of exercise of options. 3.7.16 On 8 May 2006, Xchanging B.V.’s authorised share capital was increased to include 2,000,000 Convertible Preference Class E Shares. 3.7.17 On 8 May 2006, Xchanging B.V. issued 1,332,524 Convertible Preference Class E Shares to General Atlantic Partners (Bermuda), L.P.; 219,807 Convertible Preference Class E Shares to GAP-W International, LLC; 109,284 Convertible Preference Class E Shares to GapStar LLC; 231,916 Convertible Preference Class E Shares of to GAP Coinvestment Partners II, L.P. and 1,489 Convertible Preference Class E Shares to GAPCO GmbH & Co. KG., all at an issue price of £5.50 per share and total purchase price of £10,422,610 in full and final satisfaction of the principal and interest of £10,422,610 owed by Xchanging B.V. to the General Atlantic subscribers, the subject of this issue, under the terms of 1.71% Senior Convertible Promissory Notes held by them. 3.7.18 On 10 May 2006, Xchanging B.V. issued 10,510 Common Shares at an issue price rounded to A3.30 per share to David Bauernfeind for consideration of A34,656.73 in accordance with the

199 rules of the Unapproved Share Option Plan; 30,300 Common Shares at an issue price rounded to A1.51 per share to John Benjamin for consideration of A45,785.95 in accordance with the rules of the Unapproved Share Option Plan; 49,500 Common Shares at an issue price rounded to A3.33 per share to Adele Browne for consideration of A165,062.82 in accordance with the rules of the Unapproved Share Option Plan; 10,000 Common Shares at an issue price rounded to A3.39 per share for 5,000 Common Shares in accordance with the rules of the Unapproved Share Option Plan and A3.28 per share for 5,000 Common Shares in accordance with the rules of the Approved Share Option Plan to Darren Fisher for a total consideration of A33,357.50; 150,000 Common Shares at an issue price rounded to A3.33 per share, 500 shares being in accordance with the rules of the Approved Share Option Plan and 149,500 in accordance with the rules of the Unapproved Share Option Plan to Richard Houghton for a total consideration of A500,190.35; 80,000 Common Shares at an issue price rounded to, respectively, A1.15 per share for 1,584 Common Shares in accordance with the rules of the Approved Share Option Plan and, in accordance with the rules of the Unapproved Share Option Plan, A3.39 per share for 10,000 Common Shares, A3.33 per share for 8,416 Common Shares, A3.33 per share for 40,000 Common Shares and A5.57 per share for 20,000 Common Shares to Mike Margetts for a total consideration of A308,646.54; 4,328 Common Shares at an issue price rounded to A3.30 per share to Thomas Peel for consideration of A14,240 in accordance with the rules of the Approved Share Option Plan; 150,000 Common Shares at an issue price rounded to, respectively, A3.33 per share for 6,570 Common Shares in accordance with the rules of the Approved Share Option Plan and, in accordance with the rules of the Unapproved Share Option Plan, A5.90 per share for 25,000 Common Shares, A3.33 per share for 118,430 Common Shares to David Rich-Jones for a total consideration of A564,303.79; 10,497 Common Shares at an issue price rounded to A3.31 per share to Peter Rushton for consideration of A34,766.58 in accordance with the rules of the Unapproved Share Option Plan and 20,000 Common Shares at an issue price rounded to, respectively, A3.39 per share for 2,365 Common Shares in accordance with the rules of the Approved Share Option Plan and, in accordance with the rules of the Unapproved Share Option Plan, A3.33 per share for 17,400 Common Shares and A3.30 per share for 235 Common Shares to Gary Whitaker for a total consideration of A66,820.65, all the above being pursuant to notice of exercise of options. 3.7.19 On 23 May 2006, Xchanging B.V. issued 20,000 Common Shares at an issue price rounded to A5.57 per share to Stephen Bowen for consideration of A111,452.91 in accordance with the rules of the Unapproved Share Option Plan; 6,000 Common Shares at an issue price rounded to A3.33 per share for 1,000 Common Shares and A5.57 per share for 5,000 Common Shares to Ruth Craven for consideration of A31,198 in accordance with the rules of the Approved Share Option Plan; 8,000 Common Shares at an issue price rounded to A5.59 per share to Nicholas Edwards for consideration of A44,734.40 in accordance with the rules of the Unapproved Share Option Plan; 5,000 Common Shares at an issue price rounded to A5.57 per share to Michael Hannan for consideration of A27,863.23 in accordance with the rules of the Unapproved Share Option Plan; 2,500 Common Shares at an issue price rounded to A3.28 per share to Nicole Jones for consideration of A8,197 in accordance with the rules of the Approved Share Option Plan and 4,485 Common Shares at an issue price rounded to A3.33 per share to Christopher Main for consideration of A14,955.69 in accordance with the rules of the Approved Share Option Plan and all pursuant to notices of exercise of options. 3.7.20 On 23 June 2006, Xchanging B.V.’s authorised share capital was increased to include a further 100,000 Convertible Preference Class A Shares. 3.7.21 On 23 June 2006, Xchanging B.V. issued 568,750 Convertible Preference Class A Shares to 52nd Street Associates in full and final satisfaction of a warrant to purchase 468,750 Convertible Preference Class A Shares dated 19 September 2000 (exercised on 15 February 2005) from Xchanging B.V. in favour of 52nd Street Associates and a letter agreement dated 23 June 2006 between Xchanging B.V. and McKinsey & Company, Inc. (in respect of an additional 100,000 Convertible Preference Class A Shares) for an issue price of US$3.20 per share. 3.7.22 On 1 September 2006, Xchanging B.V. cancelled 11,110 G Shares and 1,785,714 Class B Common Shares, all held by Xchanging B.V..

200 3.7.23 On 1 December 2006, Xchanging B.V. issued 14,573 Common Shares at an issue price rounded to A1.97 per share for 7,287 Common Shares, A5.55 per share for 1,150 Common Shares both in accordance with the rules of the Approved Share Option Plan and A5.55 per share for 6,136 Common Shares in accordance with the rules of the Unapproved Share Option Plan to Hamish Coop for a total consideration of A54,778.12; 5,208 Common Shares at an issue price rounded to A5.75 per share to Anthony Burke for consideration of A29,956.42 in accordance with the rules of the Approved Share Option Plan; 15,000 Common Shares at an issue price rounded to A5.57 per share to Gary Whitaker for consideration of A83,589.68 in accordance with the rules of the Approved Share Option Plan; 5,000 Common Shares at an issue price rounded to A5.59 per share to Michael Taylor for consideration of A27,959 in accordance with the rules of the Approved Share Option Plan; 16,800 Common Shares at an issue price rounded to A3.28 per share for 10,000 Common Shares and A5.59 per share for 6,800 Common Shares to Steven Beard for consideration of A70,812.24 in accordance with the rules of the Approved Share Option Plan; 20,000 Common Shares at an issue price rounded to A1.03 per share to John Robins for consideration of A20,601.61 in accordance with the rules of the Unapproved Share Option Plan and 15,883 Common Shares at an issue price rounded to A1.97 per share for 14,583 Common Shares and A5.54 per share for 1,300 Common Shares to David White for consideration of A35,807.38 in accordance with the rules of the Unapproved Share Option Plan and all pursuant to notices of exercise of options. 3.7.24 On 2 February 2007, Xchanging B.V.’s authorised share capital was increased to include 2,500,000 Class F Common Shares. 3.7.25 On 5 February 2007, Xchanging B.V. issued, at an issue price of £5.30 per share for all Class F Common Shares in this issue, 125,000 Class F Common Shares to Adele Browne for consideration of £662,500; 100,000 Class F Common Shares to Clive Buesnel for consideration of £530,000; 15,000 Class F Common Shares to Darren Fisher for consideration of £79,500; 250,000 Class F Common Shares to David Rich-Jones for consideration of £1,325,000; 37,500 Class F Common Shares to Gary Whitaker for consideration of £198,750; 25,000 Class F Common Shares to Jonathan Stratford for consideration of £132,500; 80,000 Class F Common Shares to Melissa Pitt for consideration of £424,000; 75,000 Common Class F Shares to Mike Margetts for consideration of £397,500; 125,000 Class F Common Shares to Richard Houghton for consideration of £662,500; 50,000 Class F Common Shares to Stephen Bowen for consideration of £265,000; 300,000 Class F Common Shares to Steven Beard for consideration of £1,590,000; and 33,266 Class F Common Shares to Thomas Runge for consideration of £176,309.80. All such Class F Common Shares were issued pursuant to the SPP, with the subscription price for the shares being loaned to the subscribers listed above by the Xchanging B.V. 2007 Employee Benefit Trust. 3.7.26 On 10 April 2007, Xchanging B.V., in accordance with the rules of the Approved Share Option Plan, issued as fully paid 21,285 Common Shares to Mike Margetts at an exercise price of A1.9612 per share for consideration of A41,744.14. 3.7.27 On 10 April 2007, Xchanging B.V. in accordance with the rules of the Unapproved Share Option Plan, issued as fully paid 13,715 Common Shares to Mike Margetts at an exercise price of 1.9612 per share for consideration of A26,897.86 and 35,000 Common Shares at an exercise price of A5.523 per share for consideration of A193,305. 3.7.28 On 11 April 2007, Xchanging B.V., in accordance with the rules of the Approved Share Option Plan, issued as fully paid: 1,000 Common Shares at A0.44924 per share to Jarrod Nicholson for cash consideration of A449.24 and 1,000 Common Shares at an exercise price of A1.03008 per share for consideration of A1,030.08; 3.7.29 On 19 April 2007, Xchanging B.V., in accordance with the rules of the Unapproved Share Option Plan, issued as fully paid: 40,002 Common Shares at their par value to Clive Buesnel for cash consideration of A400.02, together with an undertaking to pay A78,051.90 in respect of the balance of the exercise price; 36,000 Common Shares at their par value to David Rich-Jones for cash consideration of A360, together with an undertaking to pay A70,243.20 in respect of the balance of the exercise price; 25,000 Common Shares at their par value to Gary Whitaker for cash consideration of A250, together with an undertaking to pay

201 A93,302.50 in respect of the balance of the exercise price; 117,500 Common Shares at their par value to Johannes Maret for cash consideration of A1,175, together with an undertaking to pay A664,407.50 in respect of the balance of the exercise price; 50,000 Common Shares at their par value to John Robins for cash consideration of A500, together with an undertaking to pay A118,804.52 in respect of the balance of the exercise price; 50,000 Common Shares to Nigel Rich for cash consideration of A500, together with an undertaking to pay A395,000 in respect of the balance of the exercise price; 50,000 Common Shares at their par value to Dennis Millard for cash consideration of A500 together with an undertaking to pay A395,600 in respect of the balance of the exercise price; 25,000 Common Shares at their par value to Stephen Brenninkmeijer for cash consideration of A250, together with an undertaking to pay A93,302.50 in respect of the balance of the exercise price; and 25,000 Common Shares at their par value to John Bramley for cash consideration of A250, together with an undertaking to pay A93,302.50 in respect of the balance of the exercise price. 3.8 BAE Systems will exercise the BAE Warrant (which gives BAE Systems the right to subscribe for Common Shares of Xchanging B.V.), on the day of but prior to Admission in accordance with the terms of the Takeover Offer Agreement. For further details see the description of the Takeover Offer Agreement set out in paragraph 18.9 of this Part 8: Additional Information. Immediately following the exercise of the BAE Warrant, Xchanging B.V. shall issue fully paid 772,019 Common Shares of Xchanging B.V. to BAE Systems in consideration of £443,712 and US$2,212,301. A summary of the BAE Warrant is set out in paragraph 18.2 of this Part 8: Additional Information. 3.9 General Atlantic Partners (Bermuda), L.P. and GAP Coinvestment Partners II, L.P. will convert the Rebus Loan on the day of but prior to Admission in accordance with the terms of the Takeover Offer Agreement. For further details see the description of the Takeover Offer Agreement set out in paragraph 18.9 of this Part 8: Additional Information. Immediately following the conversion of the Rebus Loan, Xchanging B.V. shall issue fully paid 1,128,681 Convertible Preference Class E Shares to General Atlantic Partners (Bermuda), L.P. and 234,955 Convertible Preference Class E Shares to GAP Coinvestment Partners II, L.P. in satisfaction of all liabilities under the Rebus Loan. 3.10 Immediately prior to Admission, the authorised, issued and fully paid share capital of Xchanging B.V. will be as follows:

Nominal Authorisedvalue Issued and fully paid Share Class Number Amount (E) per share (E) Number Amount (E) Convertible Preference Class A...... 19,600,000 A196,000.00 A0.01 19,600,000 A196.000 Convertible Preference Class B...... 4,826,255 A48,262.55 A0.01 4,826,255 A48,262.55 Convertible Preference Class C...... 20,000,000 A200,000.00 A0.01 —— Convertible Preference Class D ...... 1,818,181 A18,181.81 A0.01 1,818,181 A18,181.81 Convertible Preference Class E...... 3,258,656 A32,586.56 A0.01 3,258,656 A32,586.56 Class A Common...... 1,785,714 A17,857.14 A0.01 1,785,714 A17,857.14 Class C Common...... 1,785,715 A17,857.15 A0.01 1,785,715 A17,857.15 Class F Common ...... 2,500,000 A25,000.00 A0.01 1,215,766 A12,157.66 Class G...... 100,000 A1,000.00 A0.01 73,537 A735.37 Scheme A Shares...... 2,937,500 A29,375.00 A0.01 937,500 A9,375.00 Scheme B Shares ...... 126,000 A1,260.00 A0.01 126,000 A1,260.00 Common...... 53,581,245 A535,812.45 A0.01 6,163,006 A61,630.06 TOTAL...... 112,424,240 A1,124,242.40 41,590,330 A415,903.30

Under the terms of the Takeover Offer Agreement and following the Acquisition and the share capital reorganisation described in paragraph 3.5 of this Part 8: Additional Information, the issued and fully paid share capital of Xchanging B.V. of 41,590,330 shares will have been exchanged for 174,328,408 Shares (excluding any New Shares). 3.11 Xchanging Holdings Limited (‘‘XHL’’) (which changed its name from Clippercrown Limited to Xchanging Holdings Limited with effect from 4 April 2007 pursuant to a special resolution dated 3 April 2007) was incorporated with £100 authorised share capital on 31 October 2006. XHL became a wholly owned subsidiary of the Company on 23 April 2007. Following Admission, it is intended that XHL will be inserted between the Company and Xchanging B.V. by means of a share for share exchange and that XHL will effect a court approved capital reduction (pursuant to section 135 of the Act) to create distributable reserves.

202 3.12 Upon Admission, the Company will be subject to the continuing obligations of the Listing Rules published by the FSA with regard to the issue of securities for cash and the provisions of section 89 of the Act (which confers on shareholders rights of pre-emption in respect of the allotment of equity securities which are, or are to be, paid up in cash) apply to the balance of the authorised but unissued share capital of the Company which is not the subject of the disapplication referred to above. 3.13 The Shares are in registered form and, from Admission, will be capable of being held in uncertificated form and title to such shares may be transferred by means of a relevant system (as defined in the Regulations). Where Shares are held in certificated form, share certificates will be sent to the registered members by first class post. Where Shares are held in CREST, the relevant CREST stock account of the registered members will be credited. 3.14 As at 31 December 2006, there were no Shares held by any member of the Group. 3.15 Immediately following the Global Offer, the Major Shareholder will in aggregate control the exercise of 34.3% of the rights to vote at a general meeting of the Company (or 28.2% if the Over-allotment Option is exercised in full). 3.16 Mandatory Bids On Admission, the City Code on Takeovers and Mergers (the ‘‘Takeover Code’’) will apply to the Company. Rule 9 of the Takeover Code provides that if any person or group of persons acting in concert with each other, acquire an interest in shares which, when taken together with shares in which that person or group of persons are already interested: (i) would increase their aggregate interests to an amount carrying 30% or more of the voting rights in the Company; or (ii) where the persons or group of persons are interested in shares which in aggregate carry more than 30% of the voting rights in the Company but do not hold shares carrying more than 50% of such voting rights, would increase their percentage of shares carrying voting rights in which they are interested, the person and, depending on the circumstances, its concert parties, would be required (except with the consent of the Panel on Takeovers and Mergers) to make a cash offer for the outstanding shares in the Company as well as any other class of transferable securities carrying voting rights in the Company at a price not less than the highest price paid for interests in shares by the acquirer or its concert parties during the previous 12 months. Following Admission, General Atlantic will be interested in Shares carrying 34.3% (or 28.2% if the Over-allotment Option is exercised in full) of the Company’s voting share capital, (but will not hold Shares carrying more than 50% of such voting rights) and if such interest is 30% or more any further increase in its interest in Shares will be subject to the provisions of Rule 9 of the Takeover Code. 3.17 Squeeze-out and Sell-out Rules Under the 2006 Act, an offeror in respect of a takeover offer for the Company has the right to buy out minority shareholders where he has acquired (or unconditionally contracted to acquire) 90% in value of the shares to which the offer relates. The notice to acquire shares from minority shareholders must be sent within three months of the last day on which the offer can be accepted. The squeeze out of minority shareholders can be completed at the end of six weeks from the date the notice has been given. In addition, where there has been a takeover offer for the Company, minority shareholders can require the offeror to purchase the remaining shares provided that at any time before the end of the period within which the offer can be accepted, the offeror has acquired (or contracted to acquire) at least 90% in value of all voting shares in the Company, which carry not less than 90% of the voting rights. A minority shareholder can exercise this right at any time until three months after the period within which the offer can be accepted. An offeror shall give the remaining shareholders notice of their rights within one month from the end of the period in which the offer can be accepted.

4. MEMORANDUM AND ARTICLES OF ASSOCIATION 4.1 The Memorandum of Association of the Company provides that the Company’s principal objects are, among others, to act as an investment holding company and to do all such things that are, in the opinion of the directors of the Company, incidental or conducive to the attainment of all or any of the Company’s objects. The objects of the Company are set out in full in clause 4 of its Memorandum of Association which is available for inspection in the manner specified in paragraph 23 of this Part 8: Additional Information.

203 4.2 The Articles of Association of the Company adopted pursuant to a special resolution passed at the annual general meeting of the Company held on 23 April 2007 contain provisions to the following effect: 4.2.1 Rights Attaching to Shares (a) Voting rights of members Subject to any special rights or restrictions as to voting for the time being attached to any class of shares by or in accordance with the articles (as to which there are none at Admission), and subject to disenfranchisement in the event of non-payment of any call or other sum due and payable in respect of any share or non compliance with any statutory notice requiring disclosure of the beneficial ownership of any shares, at a general meeting every member present in person has on a show of hands one vote and every member present in person or by proxy has on a poll one vote for every share of which he is the holder. In the case of joint holders of a share, the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the vote or votes of the other joint holder or holders, and seniority is determined by the order in which the names of the holders stand in the register. Unless the Board decides otherwise, no member is entitled in respect of a share held by him to be present or vote, either in person or by proxy, at a general meeting or at a separate meeting of the holders of any class of shares or on a poll, or to exercise other rights conferred by membership in relation to the meeting or poll, if a call or other amount due and payable in respect of the share is unpaid. (b) Dividends Subject to the provisions of the Acts and the Articles, the Company may by ordinary resolution declare a dividend to be paid to its members in accordance with their respective rights and interests, but no dividend may exceed the amount recommended by the Board. Except as otherwise provided by the rights attached to, or the terms of issue of shares, a dividend shall be declared and paid according to the amounts paid up on the shares in respect of which the dividend is declared and paid, but no amount paid up on a share in advance of a call may be treated for these purposes as paid up on the share. Except as otherwise provided by the rights attached to, or the terms of issue of shares, all dividends shall be apportioned and paid proportionately to the amounts paid up on the shares during any portion or portions of the period in respect of which the dividend is paid. Except as otherwise provided by the rights attached to shares, dividends may be declared or paid in any currency. The Board may agree with any member that dividends which may at any time or from time to time be declared or become due on his shares in one currency shall be paid or satisfied in another, and may agree the basis of conversion to be applied and how and when the amount to be paid in the other currency shall be calculated and paid and for the Company or any other person to bear any costs involved. Any unclaimed dividend, interest or other amount payable by the Company in respect of a share may be invested or otherwise made use of by the Board for the benefit of the Company until claimed. Any dividend which has remained unclaimed for 12 years from the date it was declared or became due for payment is forfeited and ceases to remain owing by the Company. The payment of an unclaimed dividend, interest or other amount payable by the Company in respect of a share into a separate account does not constitute the Company a trustee in respect of it. Subject to the Acts, the Board may declare and pay such interim dividends (including, without limitation, a dividend payable at a fixed rate) as appear to it to be justified by the profits of the Company available for distribution. No interim dividend shall be declared or paid on shares which do not confer preferred rights with regard to dividend if at the time of declaration, any dividend on shares which do confer a right

204 to a preferred dividend is in arrear. If the Board acts in good faith, it does not incur any liability to the holders of shares conferring preferred rights for a loss they may suffer by the lawful payment of an interim dividend on shares ranking after those with preferred rights. No dividend or other amount payable by the Company in respect of a share bears interest against the Company unless otherwise provided by the rights attached to the share. The Board may, with the prior authority of an ordinary resolution of the Company, direct that payment of a dividend may be satisfied wholly or in part by the distribution of specific assets and in particular of paid-up shares or debentures of another company. Subject to the provisions of the Acts, the Board may, with the prior authority of an ordinary resolution of the Company, offer to holders of shares the right to elect to receive shares credited as fully paid instead of cash in respect of all or part of a dividend or dividends. The Company is not obliged to send or transfer a dividend or other amount payable to a shareholder if a cheque, warrant or money order is returned undelivered or left uncashed or transfer not accepted on two consecutive occasions, or, following one such occasion, reasonable enquiries have failed to establish another address or account of the person entitled to the payment, until the shareholder notifies the Company of an address or account to be used for that purpose. The Board may deduct from a dividend or other amounts payable to a person in respect of a share amounts due from him to the Company on account of a call or otherwise in relation to a share. The Board may withhold payment of a dividend (or part of a dividend) payable to a person entitled by transmission to a share until he has provided such evidence of his right as the Board may reasonably require. (c) Return of Capital On a voluntary winding up of the Company, the liquidator may, on obtaining any sanction required by law, divide among the members in kind the whole or any part of the assets of the Company, whether or not the assets consist of property of one kind or of different kinds, and vest the whole or any part of the assets in trustees upon such trusts for the benefit of the members as he, with the like sanction, shall determine. For this purpose, the liquidator may set the value he deems fair on a class or classes of property, and may determine on the basis of that valuation and in accordance with the then existing rights of members how the division is to be carried out between members or classes of members. The liquidator may not, however, distribute to a member without his consent an asset to which there is attached a liability or potential liability for the owner. 4.2.2 Transfer of Shares (a) Shares in certificated form may be transferred by an instrument of transfer in writing in any usual form, or in any other form approved by Board. The instrument of transfer shall be executed by or on behalf of the transferor and (in the case of a transfer of a share which is not fully paid) by or on behalf of the transferee. A member may transfer all or any of his uncertificated shares in accordance with the Uncertificated Securities Regulations 2001 (‘‘Uncertificated Securities Regulations’’). Subject to the provisions of the Uncertificated Securities Regulations, the transferor of a share is deemed to remain the holder of the share until the name of the transferee is entered in the register in respect of it. Subject to the requirements of the Listing Rules, the Board may, in its absolute discretion and without giving a reason, refuse to register the transfer of a certificated share which is not fully paid or the transfer of a certificated share on which the Company has a lien.

205 The Board may also, in its absolute discretion and without giving a reason, refuse to register the transfer of a certificated share or a renunciation of a renounceable letter of allotment unless all of the following conditions are satisfied: (i) it is in respect of only one class of shares; (ii) it is in favour of (as the case may be) a single transferee or renouncee or not more than four joint transferees or renouncees; (iii) it is duly stamped (if required); and (iv) it is delivered for registration to the office or such other place as the Board may decide, accompanied by the certificate for the shares to which it relates (except in the case of a transfer by a recognised financial institution where a certificate has not been issued, or in the case of a renunciation) and such other evidence as the Board may reasonably require to prove the title of the transferor or person renouncing and the due execution by him of the transfer or renunciation or, if the transfer or renunciation is executed by some other person on his behalf, the authority of that person to do so. If the Board refuses to register the transfer of a certificated share it shall, within two months after the date on which the transfer was lodged with the Company, send notice of the refusal to the transferee. An instrument of transfer which the Board refuses to register shall (except in the case of suspected fraud) be returned to the person depositing it. In accordance with and subject to the provisions of the Uncertificated Securities Regulations, the Operator of the relevant system shall register a transfer of title to any uncertificated share or any renounceable right of allotment of a share which is a participating security held in uncertificated form unless the Uncertificated Securities Regulations permit the Operator of the relevant system to refuse to register such a transfer in certain circumstances in which case the said Operator may refuse such registration. If the Operator of the relevant system refuses to register the transfer of an uncertificated share or of any such uncertificated renounceable right of allotment of a share it shall, within the time period stipulated by the Uncertificated Securities Regulations, send notice of the refusal to the transferee. In accordance with and subject to the provisions of the Uncertificated Securities Regulations, where title to an uncertificated share is transferred by means of a relevant system to a person who is to hold such share in certificated form thereafter, the Company as participating issuer shall register the transfer in accordance with the relevant Operator-instruction, but so that the Company may refuse to register such a transfer in any circumstance permitted by the Uncertificated Securities Regulations. In accordance with the Uncertificated Securities Regulations, if the Company as participating issuer refuses to register the transfer of title to an uncertificated share transferred by means of a relevant system to a person who is to hold such share in certificated form thereafter, it shall, within two months after the date on which the Operator instruction was received by the Company, send notice of the refusal to the transferee. 4.2.3 Changes in Capital and Purchase of Own Shares (a) The Company may by ordinary resolution: (i) increase its share capital by a sum to be divided into shares of an amount prescribed by the resolution; (ii) consolidate and divide all or any of its share capital into shares of a larger amount than its existing shares; (iii) subject to the Acts, sub-divide all or any of its shares into shares of a smaller amount and so that the resolution whereby any share is sub-divided may determine that the shares resulting from such sub-division have amongst

206 themselves such preferred, deferred or other special rights or advantages or be subject to any such restrictions as the Company has power to attach to unissued or new shares; and (iv) cancel any shares which have not, at the date of the passing of the resolution, been taken or agreed to be taken by a person and diminish the amount of its share capital by the amount of the shares so cancelled. (b) Subject to the Acts and the rights attached to existing shares, the Company may also: (i) by special resolution, reduce its share capital, any capital redemption reserve, share premium account or other undistributable reserve in any way; and (ii) purchase, or agree to purchase in the future, any shares of any class (including redeemable shares) in its own capital in any way. 4.2.4 Variation of Rights Subject to the Acts, the rights attached to any class of shares may be varied or abrogated (whether or not the Company is being wound up), either with the consent in writing of the holders of at least three-fourths in nominal value of the issued shares of that class (excluding any shares of that class held as treasury shares) or with the sanction of an extraordinary resolution passed at a separate general meeting of the holders of the issued shares of that class validly held in accordance with the Articles. In addition to the provisions of the Acts regarding the variation of class rights, the Articles provide that the rights attached to a class of shares are not, unless otherwise expressly provided by those rights, deemed to be varied by the creation, allotment or issue of further shares ranking pari passu with or subsequent to them or by the purchase or redemption by the Company of its own shares in accordance with the Acts and the Articles. 4.2.5 Forfeiture The Company may serve notice on the members in respect of any amounts unpaid on their shares. The member shall be given not less than 14 clear days notice to pay the unpaid amount, together with any interest and all costs, charges and expenses incurred by the Company. In the event of non-compliance, a share in respect of which the notice is given may be forfeited by resolution of the Board. 4.2.6 Redeemable Shares Subject to the provisions of the Articles and the Acts and to the rights attached to Existing Shares, shares may be issued on terms that they are to be redeemed or, at the option of the Company or the holder, are liable to be redeemed. 4.2.7 General Meetings An annual general meeting and any extraordinary general meeting at which a special resolution is to be proposed or (subject to the Acts) at which some other resolution of which special notice under the Act has been given to the Company shall be called by not less than 21 clear days’ notice. All other extraordinary general meetings shall be called by not less than 14 clear days’ notice. Subject to the Acts, and although called by shorter notice than that specified in the Articles, a general meeting is deemed to have been duly called if it is so agreed: (a) in the case of an annual general meeting, by all the members entitled to attend and vote at the meeting; and (b) in the case of another meeting, by a majority in number of the members having a right to attend and vote at the meeting, being a majority together holding not less than 95% in nominal value of the shares giving that right. The notice shall specify whether the meeting is an annual general meeting or an extraordinary general meeting, the place, the date and time of meeting, in the case of any special business, the general nature of that business and, with reasonable prominence, that a member entitled to attend and vote may appoint one or more proxies to attend and, on a poll, vote instead of him and that a proxy need not also be a member. A notice convening

207 a meeting to pass an extraordinary resolution or a special resolution as the case may be shall specify the intention to propose the resolution as such. The notice of the meeting may also specify a time (which if the Company is a participating issuer shall not be more than 48 hours before the time fixed for the meeting) by which a person must be entered on the register in order to have the right to attend or vote at the meeting. The accidental omission to give notice of a general meeting or to send, supply or make available any document or information relating to the meeting, or the non receipt of any such notice, document or information by a person entitled to receive any such notice, document or information shall not invalidate the proceedings at that meeting. The notice of meeting shall be given to the members (other than any who, under the provisions of the Articles or the terms of allotment or issue of shares, are not entitled to receive notice), to the directors and to the auditors. The Board may determine that persons entitled to receive notices of meeting are those persons entered on the register at the close of business on a day determined by the Board, provided that, if the Company is a participating issuer, the day determined by the Board may not be more than 21 days before the day that the relevant notice of meeting is being sent. 4.2.8 Notices Save where the Articles expressly require otherwise, any notice, document or information to be sent or supplied by the Company may be sent or supplied in accordance with the 2006 Act (whether authorised or required to be sent or supplied by the Acts or otherwise) in hard copy form, in electronic form or by means of a website. 4.2.9 Directors (a) Appointment There is no age limit for directors. Directors may be appointed by the Company by ordinary resolution or by the Board. A director appointed by the Board holds office only until the dissolution of the next annual general meeting after his appointment unless he is reappointed during that meeting, and is not taken into account in determining the number of directors who are to retire by rotation at that meeting. Unless otherwise determined by ordinary resolution, the number of directors shall be not less than two and is not subject to a maximum number. A director of the Company need not be a member of the Company. (b) Remuneration Unless otherwise decided by the Company by ordinary resolution, the Company shall pay to the directors (but not alternate directors) by way of remuneration for their services as directors, such amount of aggregate fees as the Board decides (not exceeding £600,000 per annum or such larger amount as the Company may, by ordinary resolution, decide). Such fees shall be divided among the directors in such proportion as the Board decides or, if no decision is made, equally. Such a fee payable to a director is distinct from any salary, remuneration or other amount payable to him pursuant to other provisions of the articles or otherwise. Subject to the Acts and Articles and the requirements of the Listing Rules, the Board may arrange for part of a fee payable to a director to be provided in the form of fully paid shares in the capital of the Company. The salary or other remuneration of a director appointed to hold employment or executive office in accordance with the Articles may be a fixed sum of money, or wholly or in part governed by business done or profits made, or as otherwise decided by the Board, and may be in addition to or instead of a fee payable to him for his services as director pursuant to the Articles.

208 The Board shall also be repaid all reasonable travelling, hotel and other expenses properly incurred by them in the performance of their duties, including the expenses of attending the meetings of the Board, committee meetings, general meetings and separate meetings of the holders of any class of shares or debentures of the Company. The Board may grant reasonable additional remuneration and expenses (whether by way of salary, percentage of profits or otherwise) to any director of the Company who goes or resides abroad, makes a special journey or performs any special service on behalf of the Company at the request of the Board. The Board may exercise all the powers of the Company to provide pensions or other retirement or superannuation benefits and to provide death or disability benefits or other allowances or gratuities by insurance or otherwise to a person who is or has at any time been a director of the Company or a director of any company which is or was a subsidiary undertaking of or allied to or associated with the Company or a subsidiary of the Company or a predecessor in business of the Company or of a subsidiary undertaking of the Company and to the relatives or dependants of any such person. For this purpose the Board may establish, maintain, subscribe and contribute to any scheme, trust or fund and pay premiums. The Board may arrange for this to be done by the Company alone or in conjunction with another person. (c) Retirement by Rotation At each annual general meeting one-third of the directors who are subject to retirement by rotation or, if their number is not three or a multiple of three, the number nearest to but not less than one-third, shall retire from office provided that if there are fewer than three directors who are subject to retirement by rotation, one shall retire from office. If any one or more directors: (i) were last appointed or reappointed three years or more prior to the meeting; (ii) were last appointed or reappointed at the third immediately preceding annual general meeting; or (iii) at the time of the meeting will have served more than eight years as a non-executive director of the Company (excluding as the chairman of the Board), he or they shall retire from office and shall be counted in obtaining the number required to retire at the meeting. (d) Directors’ Interests A director who, to his knowledge, is in any way, whether directly or indirectly, interested in a contract, arrangement, transaction or proposal with the Company shall declare the nature of his interest at the meeting of the Board at which the question of entering into the contract, arrangement, transaction or proposal is first considered, if he knows his interest then exists, or, in any other case, at the first meeting of the Board after he knows that he is or has become interested. A director may not vote on or be counted in any quorum in relation to a resolution of the Board or of a committee of the Board concerning any contract, arrangement, transaction or proposal to which the Company is or is to be a party and in which he has an interest which is, to his knowledge, a material interest (otherwise than by virtue of his interest in shares or debentures or other securities of or otherwise in or through the Company). Notwithstanding the above, this prohibition does not apply to a resolution concerning any of the following matters: (i) the giving of a guarantee, security or indemnity in respect of money lent or obligations incurred by him or by any other person at the request of, or for the benefit of, the Company or any of its subsidiary undertakings; (ii) the giving of a guarantee, security or indemnity in respect of a debt or obligation of the Company or any of its subsidiary undertakings for which he

209 himself has assumed responsibility in whole or in part, either alone or jointly with others under a guarantee or indemnity or by the giving of security; (iii) any contract, arrangement, transaction or proposal concerning an offer of shares, debentures or other securities of the Company or any of its subsidiary undertakings for subscription or purchase, in respect of which he is or may be entitled to participate as a holder of any such securities or in the underwriting or sub-underwriting of which he is to participate; (iv) any contract, arrangement, transaction or proposal to which the Company is or is to be a party concerning another company (including a subsidiary undertaking of the Company) in which he is interested (directly or indirectly) whether as an officer, shareholder, creditor or otherwise if he does not to his knowledge hold an interest in shares (within the meaning of sections 820 to 825 of the 2006 Act) representing 1% or more of either any class of equity share capital of such company or of the voting rights of that company; (v) any contract, arrangement, transaction or proposal for the benefit of employees of the Company or any of its subsidiary undertakings (including any pension fund or retirement, death or disability scheme) which does not award him a privilege or benefit not generally awarded to the employees to whom it relates; and (vi) any contract, arrangement, transaction or proposal concerning the purchase or maintenance of an insurance policy for the benefit of directors or for the benefit of persons including directors. Subject to the Acts and provided he has disclosed to the Board the nature and extent of any direct or indirect interest of his, a director, notwithstanding his office: (i) may enter into or otherwise be interested in any contract, arrangement, transaction or proposal with the Company or in which the Company is otherwise interested, either in connection with his tenure of an office or place of profit or as seller, buyer or otherwise; (ii) may hold another office or place of profit with the Company (other than the office of auditor of the Company or auditor of any subsidiary) in conjunction with the office as director and he by himself or through his firm in a professional capacity for the Company and may be remunerated for doing so as the Board may decide; (iii) may be a director or other officer of, or may be employed by, or be party to a contract, transaction, arrangement or proposal with or otherwise interested in, a company promoted by the Company or in which the Company is otherwise interested or as regards which the Company has a power of appointment; and (iv) is not liable to account to the Company for a profit, remuneration or other benefit realised by any such contract, arrangement, transaction, proposal, office or employment and no such contract, arrangement, transaction or proposal shall be avoided on the grounds of any such interest or benefit. A director shall not vote or be counted in the quorum at a meeting of the directors or committee meeting in respect of any resolution concerning his own appointment (including fixing and varying the terms of his appointment or its termination), as the holder of any office or place of profit with the Company or any other company in which the Company is interested but, where proposals are under consideration concerning the appointment (including fixing or varying the terms of appointment or its termination) of two or more directors to offices or places of profit with the Company or a company in which the Company is interested, those proposals shall be divided and a separate resolution considered in relation to each director; and in such case each of the directors concerned (if not otherwise debarred from voting under the Articles) shall be entitled to vote and be counted in the quorum in respect of each resolution except that concerning his own appointment.

210 If a question arises at a meeting as to the materiality of a director’s interest (other than the interest of the chairman of the meeting) or as to the entitlement of a director (other than the chairman) to vote or be counted in a quorum and the question is not resolved by his voluntarily agreeing to abstain from voting or being counted in the quorum, the question shall be referred to the chairman and his ruling in relation to the director concerned is conclusive and binding on all concerned. If a question arises at a meeting as to the materiality of the interest of the chairman of the meeting or as to the entitlement of the chairman to vote or be counted in a quorum and the question is not resolved by his voluntarily agreeing to abstain from voting or being counted in the quorum, the question shall be decided by resolution of the directors or committee members present at the meeting (excluding the chairman) whose majority vote is conclusive and binding on all concerned. 4.2.10 Borrowing Powers Subject to the provisions of the Acts, the directors may exercise all the powers of the company to borrow money, mortgage or charge its assets and uncalled capital of the Company and issue debentures and other securities. 4.2.11 Indemnity of Directors and Officers To the extent permitted by the Acts and without prejudice to any indemnity to which he may otherwise be entitled, every person who is or was a director or other officer of the Company (other than any person (whether or not an officer of the Company) engaged by the Company as auditor) shall be and shall be kept indemnified out of the assets of the Company against all costs, charges, losses and liabilities incurred by him (whether in connection with any negligence, default, breach of duty or breach of trust by him or otherwise) in relation to the Company or its affairs provided that such indemnity shall not apply in respect of any liability incurred by him: (a) to the Company or to any associated company; (b) to pay a fine imposed in criminal proceedings; (c) to pay a sum payable to a regulatory authority by way of a penalty in respect of non-compliance with any requirement of a regulatory nature (howsoever arising); (d) in defending any criminal proceedings in which he is convicted; (e) in defending any civil proceedings brought by the Company, or an associated company, in which judgment is given against him; or (f) in connection with any application under any of the following provisions in which the court refuses to grant him relief, namely: (i) section 144(3) or (4) (acquisition of shares by innocent nominee); or (ii) section 727 (general power to grant relief in case of honest and reasonable conduct). 4.2.12 Failure to Disclose Interests in Shares If any member or other person appearing to be interested in shares of the Company has been duly served with a notice under section 793 of the 2006 Act and has failed in relation to any shares to give the Company the information required within the prescribed period from the date of service of the notice sanctions apply unless the Board otherwise decides. The sanctions are the suspension of voting or other rights conferred by membership in relation to meetings of the Company in respect of the relevant shares and, additionally, in the case of shareholders representing at least 0.25% in nominal value of their class of shares (excluding any shares of their class held as treasury shares), the withholding of payment of dividends on, and in certain cases the restriction of transfers of, the relevant shares. For the purpose of enforcing the restriction of transfers, the Board may give notice to a member requiring the member to change default shares held in uncertificated form to certificated form by the time stated in the notice.

211 The restrictions shall cease to apply seven days after the earlier of, receipt by the Company of notice of an excepted transfer (but only in relation to the shares transferred) and, receipt by the Company (in a form satisfactory to the Board) of all the information required by the section 793 notice.

5. OTHER DIRECTORSHIPS 5.1 The Directors and Senior Managers are or have been directors or partners or senior managers of the following companies and partnerships (excluding all members of the Group) at any time in the previous five years:

Directors Previous directorships/partnerships Name Current directorships/partnerships (held in the last 5 years) John Robins ...... Alexander Forbes Limited Alexander Forbes Risk Alexander Forbes Services Limited International Limited American European FFSGH (1990) Employee Business Association Investments Limited Limited FFSGH Employee Austin Reed Group Plc Investments Limited AXA Asia Pacific Holdings Forbes (1994) Share Trust Limited Forbes Share Trust Gresham College Forbes Staff Share Trust The British Museum (4225/96) Friends Forbes Staff Share Trust The National Mutual Life (10514/96) Association of Australia Limited David Andrews ...... Deutsche Borse¨ None Richard Houghton ...... None None Adele Browne ...... None None David Hodgson...... Dice, Inc. Atlantic Data Services, Inc., FDGS Holdings General Avisent General Partner LCC Partner II, LLC Avisent, L.P. General Atlantic Limited Creditek LLC General Atlantic LLC InterPro Holdings, LLC iFormation Group Holdings MarketWatch.com, Inc. General Partner, Ltd ProBusiness Insight Express, Inc. information Management IP Value Management, Inc. Corporation (Europe) Northgate Information Limited Solutions plc Pinnacor Inc. TriNet Group, Inc. Rebus HR Group Limited Rebus Insurance Services Holdings Limited S1 Corporation Smart Time Software, Inc. Suber Acquisitions Limited

212 Previous directorships/partnerships Name Current directorships/partnerships (held in the last 5 years) Tom Tinsley...... Advisory Board of the Meta4 N.V. Kellogg Institute for International Studies at the University of Notre Dame BMC Software, Inc. Critical Path, Inc. General Atlantic LLC Philanthropic Research, Inc.

Nigel Rich ...... Asia House CP Ships Limited Asia House Enterprises Exel plc Limited Granada Limited Chelsea Square Garden Granada plc Limited Hamptons Group Limited Downe House School Hamptons International Downe House School Services Commercial Limited Limited Harvey Nichols John Armit Wines Limited Group plc KGR Absolute Return PCC Sutherland Corporate Matheson & Co, Limited Services Limited Pacific Assets Trust plc Slough Estates plc The Exel Foundation Stephen Brenninkmeijer...... C&A Amdromeda Fund B.V. Emptor Services C&A Charitable Trustees Enterprise Education Trust NFTE-Europe Entrepreneurs Fund Orbis Pension Trustees Management Services Limited Limited Swiftflow Distribution Irvine Bay Trustee Company NFTE 2006 NFTE Germany Optinose UK Limited Schwab Foundation Switzerland Stichting Langenbrueck The Derwent Charitable Consultancy Dennis Millard...... Debenhams PLC Arc International PLC Smiths News PLC Cookson Group PLC Cookson Overseas Limited Exel Plc John Bramley...... None None Johannes Maret ...... DAB bank AG Allgemeine Hypothekenbank Gebr. Rhodius GmbH & Rheinboden AG Co. KG European Transaction Bank Maret GmbH Nordwind Capital GmbH MLP AG Sal. Oppenheim jr. & Cie. Triton Manager Limited KGaA

213 Previous directorships/partnerships Name Current directorships/partnerships (held in the last 5 years) Friedrich Carl Janssen ...... AXA Service AG Arthur Andersen & Co. Sal. Oppenheim GmbH International S.A. Sal. Oppenheim jr. & Cie. Corporate Finance (Schweiz) AG Bank Sal. Oppenheim jr. & Cie. (Luxemburg) S.A. Bank Sal. Oppenheim jr. & Cie. (Osterreich)¨ S.A. Bank Sal. Oppenheim jr. & Cie. (Schweiz) AG Content Management AG Deutsche Hypothekenbank AG Ernst & Young AG Financiere` Atlas gardeur AG INTERSEROH AG Oppenheim Beteiligungs AG Sal. Oppenheim jr. & Cie. KGaA Service Gen´ eraux´ de Gestion S.A. IV. Oppenheim AG V. Oppenhein AG

Senior Managers David Rich-Jones ...... Churchwells Limited Riverside House Management Mewshall Properties Limited Company (Mortlake) Perfect Properties Limited Limited Richstone Investments Limited Steven Beard...... None GlobalWave Limited Redwave Plc Wave Europe Limited Mike Margetts ...... CAD IT SpA None Clive Buesnel ...... None None Hugh Morris ...... Osprey Lodges Limited Osprey Management Services Milton House Trust Limited Odyssey Trust UK The Labrador Rescue Trust International Care and Relief Labrador Rescue (Trading) Limited Company of Management Consultants Enterprises Limited Sadler’s Wells Trust Limited Sadler’s Wells Limited Sadler’s Wells Development Trust New Sadler’s Wells Limited Stephen Bowen...... St Georges Close Limited None Melissa Pitt...... None None Gary Whitaker ...... None None

214 5.2 Save as set out below, within the period of five years preceding the date of this document none of the Directors or Senior Managers: 5.2.1 has any convictions in relation to fraudulent offences; 5.2.2 has been a director or senior manager (who is relevant to establishing that a company has the appropriate expertise and experience for the management of that company) of any company at the time of any bankruptcy, receivership or liquidation of such company; or 5.2.3 has received any official public incrimination and/or sanction by any statutory or regulatory authorities (including designated professional bodies) or has been disqualified by a court from acting as a director of a company or from acting in the management or conduct of the affairs of a company. The GlobalWave Group is a technology and investment group, which was demerged from a listed company, Internet Technology Group plc, in January 2000. Mr Beard joined the group in July 2000 to help formulate and execute a financial strategy to maximise the return to shareholders. Mr Beard was appointed as a director of three of the companies in the group: GlobalWave Limited and its wholly-owned subsidiaries, Redwave plc and Wave Europe Limited. These three companies were placed into members’ voluntary liquidation in May 2003. Mr Morris was a director of the following three companies at the time they were dissolved (by way of members’ voluntary liquidation): Osprey Management Services Limited on 30 January 2007; Company of Management Consultants Enterprises Limited on 4 July 2006; and Allow-Me Limited on 14 October 2003. Each of these companies was, at the time of its dissolution, dormant with no outstanding creditors. Meta4 N.V. was dissolved (by way of member’s voluntary liquidation) with effect from December 2004 by resolution of its board of directors on 29 December 2003. Mr Tinsley was a non-executive director of this company at that time and it was solvent at the time of its dissolution. Sutherland Corporate Services Limited was put into solvent liquidation on 24 September 2006. Nigel Rich was a director of this Company at the time of its dissolution. Mr Brenninkmeijer was a director of the following four companies at the time they were dissolved: C&A Charitable Trustees, NFTE Europe, Orbis Pension Trustees Limited and Swiftflow Distribution. Each of these companies was solvent at the time of its dissolution. 5.3 Save as disclosed below, none of the Directors or Senior Managers has any potential conflicts of interests between their duties to the Company and their private interests or other duties. The Company and General Atlantic have entered into a Relationship Deed to regulate the relationship between them following Admission. As well as being Non-executive Directors of the Company, David Hodgson and Tom Tinsley are both directors of General Atlantic LLC. David Hodgson and Tom Tinsley are the current General Atlantic Directors (as defined in paragraph 18.13 of this Part 8: Additional Information) under the Relationship Deed. Under the terms of their letters of appointment, each of David Hodgson and Tom Tinsley has agreed to use his best endeavours to promote and advance the interests of the Company and its subsidiary undertakings and to comply with the UK Listing Authority’s Model Code for securities transactions by directors of listed companies and with any code of conduct relating to securities transactions by directors and specified employees issued by the Company from time to time. For more information on the Relationship Deed, see paragraph 18.13 in this Part 8: Additional Information.

6. DIRECTORS’ AND OTHER INTERESTS The tables in this paragraph 6 of Part 8: Additional Information set out certain interests in the share capital of the Company as at 24 April 2007 (being the latest practicable date prior to publication of this document) and immediately following Admission. Each table assumes that the Acquisition and the share capital reorganisation described in paragraph 3.5 of this Part 8: Additional Information have each been completed.

215 6.1 Shares held (otherwise than pursuant to the SPP) by Directors and Senior Managers are as follows:

24 April 2007 (last practicable date prior to publication of this Immediately following document) Admission Number of Shares currently % of issued Number of % of issued Name held share capital Shares share capital Directors John Robins...... 600,000 0.34 480,000 0.23 David Andrews ...... 28,000,588(1) 16.06 22,400,588 10.90 Richard Houghton...... 1,700,000 0.98 1,700,000 0.83 Adele Browne ...... 1,350,084 0.89 1,350,084 0.66 Nigel Rich...... 200,000 0.11 200,000 0.10 Stephen Brenninkmeijer...... 350,000 0.20 350,000 0.17 Dennis Millard...... 200,000 0.11 100,000 0.05 John Bramley ...... 348,000 0.20 348,000 0.17 Johannes Maret ...... 1,579,976 0.91 1,224,004 0.60 Senior Managers Steven Beard ...... 67,200 0.04 67,200 0.03 Stephen Bowen ...... 520,088 0.30 520,088 0.25 Clive Buesnel ...... 680,008 0.39 520,000 0.25 Mike Margetts...... 1,049,992 0.60 1,049,992 0.51 David Rich-Jones...... 1,294,000 0.74 1,150,000 0.56 Gary Whitaker ...... 320,000 0.18 220,000 0.11

(1) 400,000 of these Shares are held by the Trustees of the David William Andrews Discretionary Trust. This table takes into account that on 24 April 2007 the following people sold shares in Xchanging B.V. to the Xchanging B.V. 2007 Employee Benefit Trust (‘‘2007 EBT’’) for a price equal to the Offer Price attributable to the Shares issued as consideration pursuant to the Acquisition, less any deductions payable by the 2007 EBT as a Selling Shareholder under the Underwriting Agreement: Adele Browne, 2,666 G Shares (equivalent to 599,892 Shares); Richard Houghton, 3,333 G Shares (equivalent to 749,976 Shares); Clive Buesnel, 1,111 G Shares (equivalent to 249,992 Shares); David Rich-Jones 1,111 G Shares and 62,500 Scheme A Shares (equivalent to 499,992 Shares); Stephen Bowen, 1,155 G Shares (equivalent to 259,892 Shares); and John Bramley 18,000 Scheme A Shares (equivalent to 72,000 Shares). 6.2 Shares held by Directors and Senior Managers pursuant to the SPP are as follows:

24 April 2007 (last practicable date prior to publication of Immediately following this document) Admission Number of Shares currently % of issued Number of % of issued Name held share capital Shares share capital Directors Richard Houghton ...... 500,000 0.29 500,000 0.24 Adele Browne...... 500,000 0.29 500,000 0.24 Senior Managers Steven Beard...... 1,200,000 0.69 1,200,000 0.58 Stephen Bowen...... 200,000 0.11 200,000 0.10 Clive Buesnel...... 400,000 0.23 400,000 0.19 Mike Margetts ...... 300,000 0.17 300,000 0.15 David Rich-Jones ...... 1,000,000 0.57 1,000,000 0.49 Melissa Pitt ...... 320,000 0.18 320,000 0.16 Gary Whitaker...... 150,000 0.09 150,000 0.07

216 6.3 Options which have been granted to Directors and Senior Managers under the Company’s Employee Share Plans and have not been exercised as follows: 6.3.1 Approved Share Option Plan

Subscription Name Date of grant No. of Shares price (£) Directors Richard Houghton...... 19 November 2003 85,180 0.33 Adele Browne...... 19 November 2003 85,180 0.33 Senior Managers Stephen Bowen...... 19 December 2001 2,000 0.56 19 November 2003 85,180 0.33 Clive Buesnel...... 19 December 2001 26,280 0.56 Hugh Morris ...... 19 November 2003 88,220 0.33 Melissa Pitt ...... 29 April 2003 20,000 0.95 11 April 2006 20,000 0.93 6.3.2 Unapproved Share Option Plan

Subscription Name Date of grant No. of Shares price (£) Directors Richard Houghton...... 19 November 2003 414,820 0.33 19 November 2003 500,000 0.94 Adele Browne...... 19 November 2003 314,820 0.33 19 November 2003 400,000 0.94 Johannes Maret...... 15 March 2007 200,000 1.63 Senior Managers Steven Beard ...... 29 April 2003 12,800 0.95 19 November 2003 60,000 0.33 19 November 2003 60,000 0.94 13 December 2004 200,000 0.94 Stephen Bowen...... 19 December 2001 158,000 0.56 5 March 2002 40,000 0.57 19 November 2003 74,820 0.33 19 November 2003 160,000 0.94 Clive Buesnel...... 19 December 2001 213,720 0.56 25 June 2002 40,000 0.56 19 November 2003 139,992 0.33 19 November 2003 300,000 0.94 Hugh Morris ...... 19 November 2003 111,780 0.33 19 November 2003 200,000 0.94 28 April 2004 600,000 0.97 27 April 2005 600,000 0.95 David Rich-Jones...... 19 November 2003 254,000 0.33 19 November 2003 400,000 0.94 12 July 2005 500,000 0.94 Melissa Pitt ...... 13 December 2004 40,000 0.94 6.3.3 Unapproved G Share Option Plan

Subscription Name Date of grant No. of Shares price (£) Senior Managers Stephen Bowen...... 28 April 2004 249,992 0.10 Mike Margetts...... 28 April 2004 499,984 0.10 Gary Whitaker...... 13 December 2004 150,084 0.32

217 6.4 Save as set out in this Part 8: Additional Information, following the Global Offer no Director or Senior Manager will have any interest in the share capital of the Company or any of its subsidiaries. 6.5 So far as the Company is aware, as at 24 April 2007 (being the latest practicable date prior to publication of this document) the following persons (other than the Directors and Senior Managers) are directly or indirectly interested in 3% or more of the Company’s issued share capital or will be so interested immediately following Admission:

24 April 2007 (last practicable date prior to publication of this document) Immediately following Admission Number of Number of Shares Shares (assuming no (assuming Number of exercise of full exercise Shares the Over- of the Over- currently % of issued allotment % of issued allotment % of issued Name held share capital Options) share capital Option) share capital General Atlantic(1) ...... 108,464,644 62.22 70,502,023 34.3 57,873,992 28.2 Sal. Oppenheim...... 6,912,724 3.97 4,493,271 2.2 4,493,271 2.2

(1) The General Atlantic holding is currently held as follows: General Atlantic Partners 55, L.P., 8,495,556 Shares (4.87%), GAP-Xchange Partners, L.L.C., SCA, 17,749,696 Shares (10.18%), GAP Coinvestment Partners L.P., 5,229,808 Shares (3.00%), GAP Coinvestment Partners II, L.P., 11,479,612 Shares (6.59%), General Atlantic Partners (Bermuda), L.P., 57,479,576 Shares (32.97%), GAPstar, LLC, 4,651,512 Shares (2.67%), GAPCo GMBH & Co.KG, 34,916 Shares (0.02%), GAP-W International, L.P., 3,343,968 Shares (1.92%). Save as set out in this Part 8: Additional Information, the Company is not aware of any person who is or will immediately following Admission be interested (within the meaning of the Act), directly or indirectly, in 3% or more of the issued share capital of the Company. 6.6 None of the shareholders referred to in paragraph 6.5 of this Part 8: Additional Information has different voting rights from any other holder of Shares in respect of any Shares held by them. 6.7 Save as set out in this Part 8: Additional Information, the Company is not aware of any person who immediately following Admission directly or indirectly, jointly or severally, will own or could exercise control over the Company.

7. DIRECTORS’ SERVICE AGREEMENTS AND LETTERS OF APPOINTMENT 7.1 Executive Directors’ Service Agreements 7.1.1 The Executive Directors of the Company have entered into new service agreements with the Company which are conditional upon and take effect on Admission. 7.1.2 The service agreements for the Executive Directors provide that the notice required to terminate their employment is 12 months’ given by either the director or the Company. The Company has the right to elect to terminate the employment of an Executive Director without notice or with less than 12 months’ notice by making a payment in lieu of notice equal to the base salary the Executive Director would be entitled to receive during any unexpired part of the notice period. 7.1.3 The employment of each of the Executive Directors is terminable with immediate effect if he/she: (a) commits any serious or persistent breach of any of the terms, conditions or stipulations contained in their service agreement; (b) is guilty of any serious negligence or gross misconduct in connection with or affecting the business or affairs of the Company or any company of the Group for which he/she is required to perform duties; (c) is guilty of conduct which brings or is likely to bring himself/herself or the Company or any company of the Group into disrepute; (d) is convicted of a criminal offence punishable by imprisonment (other than an offence under road traffic legislation in the United Kingdom or elsewhere for which a non-custodial penalty is imposed);

218 (e) is adjudged bankrupt or makes any arrangement or composition with his/her creditors or has an interim order made against him/her pursuant to section 252 Insolvency Act 1986; (f) is or becomes prohibited by law from being a director; (g) becomes of unsound mind or a patient under any statute relating to mental health; (h) is guilty of a serious breach of any rules issued by the Company or any company of the Group relating to the use of information technology, computer systems, email and the internet; or (i) voluntarily resigns as a director of the Company without the prior written approval of the Board. 7.1.4 The Executive Directors are entitled to receive the following benefits under the terms of their new service agreements: (a) a basic salary of £535,600 per annum (in the case of David Andrews), £360,000 per annum (in the case of Richard Houghton) and £330,000 (in the case of Adele Browne); (b) eligibility to receive an annual bonus, subject to the terms and conditions as the Remuneration Committee in its absolute discretion may determine from time to time; (c) eligibility to join the Company’s defined contribution pension arrangements subject to the rules of the arrangement. Employer contribution rates (as a percentage of basic salary per annum) to the defined contribution arrangements are: (i) 6% for members aged between 35-44 years with a member contribution of 3%; or (ii) 8% for members aged over 45 years with a member contribution of 4%; (d) 25 days holiday per annum in addition to public holidays; and (e) other customary benefits (including life assurance, permanent health insurance and eligibility to join the Group’s private medical insurance scheme). 7.1.5 Each of the Executive Directors will be subject to non-compete and non-solicitation restrictive covenants for a maximum period of 12 months following termination of their respective service agreements. 7.2 Non-Executive Directors 7.2.1 The Non-Executive Directors (including the Chairman) of the Company have entered into letters of appointment with the Company which are conditional upon and take effect on Admission. The terms of the letters of appointment are subject to the provisions of their Articles (and in the case of Tom Tinsley and David Hodgson, also subject to the Relationship Deed). The fees paid to the Non-Executive Directors and the Chairman will initially be as follows:

Fees per Non-Executive Directors annum (£) John Robins...... 125,000 Nigel Rich...... 82,500 Dennis Millard ...... 50,000 John Bramley ...... 40,000 Stephen Brenninkmeijer ...... 40,000 David Hodgson ...... 40,000 Tom Tinsley ...... 40,000 Johannes Maret...... 40,000 Friedrich Carl Janssen ...... 40,000 7.2.2 The fee payable to John Robins is in relation to his appointment as Chairman to the Board and Chairman of the Nomination Committee. The fee payable to Nigel Rich is in relation to his appointment as Deputy Chairman to the Board, senior independent director and Chairman of the Remuneration Committee. The fee payable to Dennis Millard includes a

219 fee of £10,000 per annum in relation to Mr Millard’s appointment as chair of the Audit Committee. 7.2.3 The appointment of each Non-Executive Director is for a fixed term of three years (subject to the retirement by rotation provisions in the Articles of Association) unless terminated earlier by either party upon three months’ written notice (except John Robins whose appointment is terminable by either party upon six months’ written notice). 7.2.4 The appointment of each of the Non-Executive Directors does not give rise to any entitlement of the relevant Non-Executive Director to compensation in respect of their termination. 7.2.5 In addition to the fees and benefits mentioned above, the Company will reimburse all expenses reasonably incurred by the Non-Executive Directors in the performance of their duties and will endeavour to obtain appropriate directors’ and officers’ liability insurance. 7.2.6 In addition to his letter of appointment described above, Mr Maret has entered into a special advisor agreement with Xchanging GmbH dated 26 March 2007 pursuant to which Mr Maret assists the Group in the development of the Group’s customer base in Germany and other countries in Europe. Mr Maret receives the following under the terms of the special advisor agreement with Xchanging GmbH: (a) a fee of £25,000 per annum (payable in equal quarterly instalments); (b) in relation to each potential customer or partner in respect of whom Mr Maret has assisted the Group, a fee of £200,000 on each occasion that a member of the Group signs a contract with a customer or partner with an annual value to the Group in excess of A100 million; and (c) in relation to each potential customer or partner in respect of whom Mr Maret has assisted the Group, a fee of £50,000 on each occasion that a member of the Group signs a contract with such customer or partner with an annual value to the Group of less than A100 million, but greater that A30 million. In addition, Mr Maret has been issued with the following grant of share options: (i) options over 40,000 Class F Common Shares under the Unapproved Share Option Plan at a price of £6.50 per share exercisable in the event that a fee of £200,000 described at paragraph 7.2.6(b) above first becomes payable; and (ii) options over 10,000 Class F Common Shares under the Unapproved Share Option Plan at a price of £6.50 per share exercisable in the event that a fee of £50,000 described at paragraph 7.2.6(c) above first becomes payable. These options will, on Admission, become options over 160,000 and 40,000 Shares respectively at an exercise price of £1.625 per Share. Mr Maret’s special advisor agreement is stated to be for a two year fixed term, subject to termination by either party giving no less than three months’ notice in writing. 7.3 Save as set out in this Part 8: Additional Information, there are no existing or proposed service agreements between any Director and any member of the Group providing for benefits upon termination of employment.

8. EMPLOYEE SHARE PLANS 8.1 The Group has adopted the following employee share plans: the Approved Share Option Plan, the Unapproved Share Option Plan, the Unapproved G Share Option Plan, the SPP, the ESOP and the PSP. 8.2 The Group has also established the Xchanging Employee Benefit Trust, the Infrex Employee Share Trust and the Xchanging B.V. 2007 Employee Benefit Trust. 8.3 The holders of all options under the Approved Share Option Plan, the Unapproved Share Option Plan and the Unapproved G Share Option Plan have agreed, conditionally on Admission taking place, to exchange their existing options over shares in Xchanging B.V. for new options over Shares. These new options will remain subject to the rules of the plans under which they were granted. The

220 Board has resolved that, following Admission, no further options will be granted under the Approved Share Option Plan, the Unapproved Share Option Plan and the Unapproved G Share Option Plan, nor will any further awards be made under the SPP. On 2 May 2007 an ex-employee of the Group may exercise options over 20,000 Shares under the Approved Share Option Plan in order to allow him to benefit from a UK favourable tax treatment which would not be available if such options were exercised at a later date. In addition, on the first business day following 1 June 2007 employees of the Group may exercise vested options over Shares under the Approved Share Option Plan, the Unapproved Share Option Plan and the Unapproved G Share Option Plan, such exercise date having been deferred from the option exercise date scheduled for the first business day following 1 May 2007. Thereafter, the intention is that option exercises under the above three Plans will generally take place on or about 1 May and 1 November of each year, as has been the practice in the past. The aggregate number of Shares subject to outstanding options under each of the Approved Share Option Plan, the Unapproved Share Option Plan and the Unapproved G Share Option Plan on 24 April 2007 is 22,766,236. Up to 11,974,076 of these Shares could be issued in respect of vested options exercisable on the first business day following 1 June 2007. The intention is that the two new Employee Share Plans summarised in paragraphs 8.8 and 8.9 will be operated in the future. The current intention is that the first PSP awards will be made in early 2008, although options may be granted under the ESOP at any time. The Chief Executive Officer, David Andrews, intends to make personal gifts of Shares in the Company, shortly after Admission, to all employees of the Group. These gifts, together with Shares which David Andrews will sell to cover the costs of applicable tax in connection therewith, will not exceed in aggregate 1,000,000 Shares. The precise timing and amount of these gifts and employee eligibility criteria have not yet been finalised. Any Shares given to employees in this way will not be subject to any sale restrictions and so may be sold by employees on or any time after the date on which they are acquired by employees. Details of the Employee Share Plans are set out in paragraphs 8.4 to 8.12 below (the summaries of two new Employee Share Plans are more detailed than the summaries of the other Employee Share Plans, under which no further options or awards will be granted): 8.4 The Unapproved Share Option Plan The Unapproved Share Option Plan, which was adopted by Xchanging B.V. on 25 July 2000, is not approved by HMRC. The number of Shares subject to outstanding options under the Unapproved Share Option Plan on 24 April 2007 was 14,596,528 at exercise prices ranging from £0.332 to £1.625 and with exercise dates up to 15 March 2017. Options are personal to participants and may not be transferred except on death. Options are not pensionable. Options cannot normally be exercised within three years of the date of grant and may not be exercised more than 10 years after their date of grant. Options may only be exercised on the first business day immediately following 1 May or 1 November of any calendar year or on such alternative dates as the Board may permit. At the Board meeting of Xchanging B.V. held on 15 March 2007, the 1 May 2007 exercise date was postponed until 1 June 2007. The exercise of options may be satisfied by the issue of new shares or the transfer of existing shares. Early exercise of options is permitted if a participant ceases to be employed by reason of death, injury, disability, redundancy, retirement or the transfer out of the group of the business or subsidiary by which the optionholder is employed or in other circumstances determined by the grantor. In the event of a change of control of Xchanging B.V., the option holder will, with the agreement of the acquiring company, release his rights under the option in exchange for new options over shares in the acquiring company with equivalent rights of the same value. In the event of any increase or variation of share capital, or in the event of a demerger or special dividend, the Board may make such adjustments as it considers appropriate to the number of shares under option and the price at which they may be acquired. The Board may alter the rules of the Unapproved Share Option Plan at any time. Any amendment that is to the disadvantage of an optionholder requires the consent of the optionholder.

221 8.5 The Approved Share Option Plan The Approved Share Option Plan was adopted by Xchanging B.V. on 19 April 2000 and was approved by HMRC on 17 May 2000. The number of Shares subject to outstanding options under the Approved Share Option Plan on 24 April 2007 was 3,986,744 at exercise prices ranging from £0.332 to £1.325 and with exercise dates expiring up to 5 February 2017. The rules of the Approved Share Option Plan are substantially the same as the rules of the Unapproved Share Option Plan set out above. However, there is no compulsory exchange of options in the event of a change of control of Xchanging B.V.. In addition, adjustments to the terms of options granted under the Approved Share Option Plan must be approved by HMRC. The consent of HMRC is also required in respect of amendments made to the Approved Share Option Plan. 8.6 The Unapproved G Share Option Plan The Unapproved G Share Option Plan was adopted by Xchanging B.V. on 28 April 2004. The Unapproved Share Option Plan is not approved by HMRC. The number of Shares subject to outstanding options under the Unapproved G Share Option Plan on 24 April 2007 was 4,182,964 at exercise prices ranging from £0.096 to £0.322 and with exercise dates up to 13 December 2014. The rules of the Unapproved G Share Option Plan are substantially the same as the rules of the Unapproved Share Option Plan set out above. However, on cessation of an optionholder’s employment with the Group for any reason, his options may only be exercised if and to the extent that the grantor so determines during a period of three months, after which they will lapse. 8.7 The SPP The SPP was adopted by the Company on 16 January 2007. The Company has established the Xchanging B.V. 2007 Employee Benefit Trust, details of which are set out in paragraph 8.12 of this Part 8: Additional Information, to operate in conjunction with the SPP. The SPP is not approved by HMRC. Awards under the SPP are not pensionable. The Board does not intend to issue any further invitations after Admission to invite executives to purchase Shares under the SPP. Only the Executive Directors and certain members of senior management currently participate in the SPP. The Xchanging B.V. 2007 Employee Benefit Trust has been funded by way of a loan of £6,443,560 from Xchanging B.V., which the Xchanging B.V. 2007 Employee Benefit Trust has on-lent to the participants in the SPP to acquire 1,215,766 Class F Common Shares in Xchanging B.V. at market value. Conditional on Admission, those shares have been exchanged for 4,863,064 Shares. No interest is payable on a loan (unless the participant defaults on repayment of the loan, in which case default interest will be payable). The loans will become repayable on the first to occur of the employee ceasing employment, the employee transferring or otherwise disposing of his Shares (or attempting to do so), the employee accepting another loan from a member of the Group to refinance the loan and the ‘‘long-stop’’ date of 31 December 2011. If a participant ceases to be employed for any other reason than by reason of death, injury, disability, redundancy or retirement (or his employing business or subsidiary being transferred out of the Group), the participant can be required to sell his Shares to the Xchanging B.V. 2007 Employee Benefit Trust at the lower of fair market value and the purchase price paid for the original Xchanging B.V. shares. In order to enable the Xchanging B.V. 2007 Employee Benefit Trust to enforce repayment of the loan (in any circumstances), the Xchanging B.V. 2007 Employee Benefit Trust has a call option over all of each participant’s Shares until the participant’s loan is repaid in full. If a participant ceases to be employed by reason of death, injury, disability, redundancy or retirement (or his employing business or subsidiary being transferred out of the Group) (‘‘good leaver reasons’’), he can be required to sell his Shares to the Xchanging B.V. 2007 Employee Benefit Trust for their fair market value. A participant who ceases employment for a good leaver reason can oblige the Xchanging B.V. 2007 Employee Benefit Trust to purchase his Shares at their fair market value. Any other leaver can oblige the Xchanging B.V. 2007 Employee Benefit Trust to purchase his shares at the lower of the original purchase price paid for the original Xchanging B.V. shares and fair market value. In each

222 case the participant can only oblige the Xchanging B.V. 2007 Employee Benefit Trust to purchase sufficient Shares to enable the loan to be repaid. Aside from a possible sale of Shares on leaving employment (as described above), participants may not normally sell, transfer or otherwise dispose of their Shares for a period of 18 months from the date of issue of the original Xchanging B.V. shares. However, if there is a change of control, scheme of reconstruction or amalgamation or winding up of the Company, participants may sell their Shares even where the event in question occurs within 18 months from the date of issue of the original Xchanging B.V. shares. 8.8 The PSP The Remuneration Committee will be responsible for the operation of the PSP, which will be operated in conjunction with the Xchanging B.V. 2007 Employee Benefit Trust. However, in the case of participants who are neither Executive Directors nor other very senior executives designated as ‘‘senior managers’’ in the PSP, all references below to the Remuneration Committee should be read as instead applying to the Board. The PSP is not intended to be approved by HMRC. Awards under the PSP are not pensionable. The Remuneration Committee may select any employee (including executive directors) of the Company or any of its subsidiaries to participate in the PSP. Only the Executive Directors and certain members of senior management will initially participate in the PSP. An award takes the form of an option with a nil exercise price or an allocation, being a deferred right to acquire Shares in the future at no cost to the participant. The Remuneration Committee may also decide that an award should take the form of forfeitable Shares (if it would be advantageous for tax or other reasons for a participant to hold forfeitable Shares in a particular jurisdiction rather than holding an option or allocation) or such other form of award as has substantially the same economic effect. If forfeitable Shares are awarded under the PSP, a participant holding forfeitable Shares will not be automatically entitled to receive dividends or be able to vote the Shares until the Shares have vested (vesting will be on the same terms as for options and allocations). However, whatever the form of the award, the Remuneration Committee may determine that the participant should receive cash or additional Shares by reference to dividends paid on those Shares which vest under the SPP. Awards may be made during the six weeks following Admission and thereafter during the period of six weeks following the announcement by the Company of its results for any period and at any other time when the grant of awards would not be prohibited under the Model Code or the Company’s own share dealing code. No awards may be made after 23 April 2017, being 10 years after the date on which the PSP was adopted. Awards comprise a basic award and a ‘‘stretch’’ award. The maximum number of Shares subject to a basic award granted to an individual in any financial year will be equal to 100% of annual base salary as at the award date. The maximum number of Shares subject to a ‘‘stretch’’ award granted to an individual in any financial year will be equal to 50% of salary. However, if the Remuneration Committee decides that exceptional circumstances exist in relation to the recruitment or retention of an employee, the maximum award level will be 300% of annual base salary. Awards are personal to a participant and, except on death, may not be transferred. The performance conditions will be determined by the Remuneration Committee before awards under the PSP are made. The performance conditions applicable to awards granted in any year will be described in the annual report and accounts of the Company for that year. The performance conditions applicable to the first grant of awards will be determined by reference to the Company’s relative Total Shareholder Return (‘‘TSR’’) performance over a period of no less than three years. The Company’s relative TSR performance will be measured against those companies which make up the constituents of the FTSE 250 index (excluding investment trusts) at the date when the awards are made. The Company believes that the constituents of the FTSE 250 index will provide a meaningful and sufficiently stretching comparator group against which to measure the Company’s performance.

223 No vesting of awards under the PSP will be possible unless the Company’s relative TSR performance is at the median level against the comparator group (at which level there is 25% vesting of the basic portion of the award), with maximum vesting of the basic portion of the award only possible if performance is at or above the upper quartile of the comparator group over the performance period. In addition to the TSR performance criteria, the annual average EPS growth must be greater than RPI plus % (with to be determined by the Remuneration Committee) over the performance period for any award to vest. In addition, any vesting of the ‘‘stretch’’ portion of the award will require the Company’s relative TSR performance to be at or above upper quartile level and maximum vesting of the ‘‘stretch’’ portion of the award will require upper decile performance. The parameters of the performance measure should not be construed as providing any view on the future performance of the Company. There will be no provision for the re-testing of performance. The Remuneration Committee will regularly review the performance conditions for future awards to ensure they are appropriate for the Company and the prevailing recruitment market. The conditions may be varied in exceptional circumstances following the grant of an award so as to achieve their original purpose but not so as to make their achievement any more or less difficult to satisfy. Awards will normally vest after three years, but only to the extent that the performance conditions have been met. Normally, a participant must remain employed by a member of the Group to receive his Shares. However, if a participant ceases to be employed by reason of death, injury, disability, redundancy or retirement (or his employing business or subsidiary being transferred out of the Group), his awards can nonetheless vest. If a participant ceases to be employed for any other reason, the Remuneration Committee has discretion to allow his awards to vest. In these ‘‘early leaver’’ circumstances, the Remuneration Committee may determine that the number of Shares which vest after three years shall be reduced proportionately on a time basis. Alternatively, the Remuneration Committee may allow awards to vest prior to the third anniversary of grant to the extent that the performance conditions have been satisfied at the time that the participant ceases employment, but on the basis that the number of Shares in respect of which an award may vest shall be reduced proportionately on a time basis, unless the Remuneration Committee decides otherwise. The PSP is subject to the following limits: (a) in any 10 year period, the number of Shares which may be issued or placed under option or award under the PSP and under any other executive share plan established by the Company may not exceed 5% of the issued ordinary share capital of the Company from time to time; and (b) in any 10 year period, the number of Shares which may be issued or placed under option or award under the PSP, any other executive share plan and under any employee share plan established by the Company may not exceed 10% of the issued ordinary share capital of the Company from time to time. The issue of Shares after Admission in relation to options and awards granted before Admission (whether or not granted conditional on Admission) are not counted towards the above limits. In addition, 4,006,388 Shares previously authorised by shareholders but not yet allocated to employees may be placed under option or issued without counting towards the above limits. Treasury Shares may be used to satisfy awards but these will be treated as issued for the purposes of the limits in (a) and (b) above. The Xchanging B.V. 2007 Employee Benefit Trust above may subscribe for or purchase Shares to be used to satisfy awards granted under the PSP. If there is a change of control, scheme of reconstruction or amalgamation or winding up of the Company, awards will vest to the extent that the performance conditions have been met as at that time, but on the basis that the number of Shares in respect of which an award vest shall be reduced proportionately on a time basis, unless the Remuneration Committee decides otherwise. An internal reorganisation will not trigger the early vesting of awards.

224 In the event of an increase or variation of the share capital of the Company, the Remuneration Committee may make such adjustments as it considers appropriate to the number of Shares which a participant can acquire under his awards. The Remuneration Committee may amend the PSP at any time. However, the prior approval of the Company in general meeting will be required for amendments to the advantage of participants relating to eligibility, limits, rights to exercise awards and variations of capital except for minor amendments to benefit the administration of the PSP, to take account of changes in legislation or to obtain or maintain favourable tax treatment, exchange control of regulatory treatment for participants or any member of the Group. Any amendment to the disadvantage of participants requires their majority consent. Where an award has vested, the Remuneration Committee, instead of issuing, or procuring the transfer of, Shares, may pay cash to the executive concerned. The amount to be paid shall be equal to the value of the Shares at the time of vesting. 8.9 The ESOP The ESOP is divided into two parts: Part A which has been designed for approval by HMRC and Part B which is not intended to be so approved. Options granted under the ESOP are not pensionable. The Remuneration Committee will be responsible for the operation of the ESOP. However, in the case of participants who are neither Executive Directors nor other very senior executives designated as ‘‘senior managers’’ in the ESOP, all references below to the Remuneration Committee shall be read as instead applying to the Board. A person is eligible to be granted an option under the ESOP if he or she is an employee (including an executive director) of the Company or any of its subsidiaries. Options may normally only be granted in the six weeks beginning with each of (1) the date on which the ESOP is adopted by the Company and (2) Admission (or in the case of options under Part A, in the six weeks following the date on which Part A of the ESOP is approved by HMRC) and thereafter in the six-week period following the announcement by the Company of its results for any period. Options may be granted outside these periods in exceptional circumstances. No options may be granted after 23 April 2017, being 10 years after the date of adoption of the ESOP. Options are personal to participants and may not be transferred except on death. A participant may not receive in any year an option over Shares with a market value in excess of two times (or three times in exceptional circumstances) his basic salary. The aggregate market value of Shares which any person may acquire upon exercise of options granted under Part A of the ESOP may not, in aggregate with other outstanding HMRC-approved discretionary options, exceed £30,000. The price payable for each Share under option will be determined by the Remuneration Committee before the grant of the option, provided that it shall not be less than the market value of a Share at the time the option is granted. An option will normally be exercisable between three and 10 years following its grant. In the event that options are granted under this plan to senior managers, such options will only be exerciseable where a specified performance condition (which will be described in the Company’s annual report and accounts) has been satisfied. If a participant ceases to be employed through death, injury, disability, redundancy, normal retirement or in the event that the employing company or business is sold out of the Group, or in exceptional circumstances determined by the Remuneration Committee, the option can be exercised from the third anniversary of the date of grant. In the event of a takeover, reconstruction or winding-up of the Company, early exercise of options is permitted based on the level of performance up to the date of the triggering event Where an option has been exercised under Part B, the Remuneration Committee may elect, instead of issuing or procuring the transfer of Shares, to pay cash to the executive concerned. The amount to be paid (subject to deduction of tax or similar liabilities) shall be equal to the amount by which the market value of the Shares subject to the option on the day before the option was exercised exceeds the exercise price.

225 In the event of any increase or variation of share capital, the Remuneration Committee may make such adjustments as it considers appropriate to the number of Shares under option and the price at which they may be acquired. Adjustments to the terms of options granted under Part A must be approved by HMRC. The ESOP contains the following limits: (a) in any 10-year period, the number of Shares which may be issued or placed under option or award under the ESOP and under any other executive share plan established by the Company may not exceed 5% of the issued ordinary share capital of the Company from time to time; and (b) in any 10-year period, the number of Shares which may be issued or placed under option or award under the ESOP, any other executive share plan and under any other share plan established by the Company may not exceed 10% of the issued ordinary share capital of the Company from time to time Shares may be transferred out of treasury to satisfy options granted under the ESOP but any shares so transferred will be treated as issued for the purposes of the limits in (a) and (b) above. The issue of Shares after Admission in relation to options and awards granted before Admission (whether or not granted conditional on Admission) are not counted towards the above limits. In addition, 4,006,388 Shares previously authorised by shareholders but not yet allocated to employees may be placed under option or issued without counting towards the above limits. The Remuneration Committee may amend the ESOP at any time. However, the prior approval of the Company in general meeting will be required for amendments to the advantage of optionholders relating to eligibility, limits, rights to exercise options and variations of capital, except for minor amendments to benefit the administration of the ESOP, to take account of changes in legislation or to obtain or maintain favourable tax treatment, exchange control or regulatory treatment for participants or any member of the Group. Any amendment to the disadvantage of participants requires their majority consent. The consent of HMRC is required in respect of amendments made to key features of Part A of the ESOP. 8.10 Infrex Employee Share Trust The trustees of the Infrex Employee Share Trust are David Andrews and John Bramley. The Infrex Employee Share Trust is a discretionary trust for the benefit of such employees of Xchanging UK Limited and its subsidiaries as the trustees decide to benefit. On 10 April 2007, the Infrex Employee Share Trust sold, in aggregate, 14,723 Common Shares to certain employees of the Group (within the class of beneficiaries of that Trust), as follows: 5,000 Common Shares to Gary Whitaker; 1,500 Common Shares to John Doherty; 4,223 Common Shares to Jonathan Stratford; 2,000 Common Shares to Stephane Bouvier; and 2,000 Common Shares to Darren Fisher, each at purchase price of £7.34 per Common Share. The Infrex Employee Share Trust holds a further 47,777 Common Shares which, conditional on Admission, have been exchanged for 191,108 Shares. 8.11 Xchanging Employee Benefit Trust The trustee of the Xchanging Employee Benefit Trust is Ogier Employee Benefit Trustee Limited, an independent professional trustee situated in Jersey. The Xchanging Employee Benefit Trust is a discretionary trust for the benefit of such employees of Xchanging B.V. and its subsidiaries as the trustees decide to benefit. The Xchanging Employee Benefit Trust does not hold any Common Shares. 8.12 Xchanging B.V. 2007 Employee Benefit Trust The trustee of the Xchanging B.V. 2007 Employee Benefit Trust is Ogier Employee Benefits Trustee Ltd, an independent professional trustee situated in Jersey. The Xchanging B.V. 2007 Employee Benefit Trust is a discretionary trust for the benefit of such employees of Xchanging UK Limited as the trustees decide to benefit. The Xchanging B.V. 2007 Employee Benefit Trust has been funded by way of a loan from Xchanging B.V. in order to enable selected executives to participate in the SPP (see paragraph 8.7 above). The Xchanging B.V. 2007 Employee Benefit Trust was established in order to operate in conjunction with the SPP summarised at paragraph 8.7 above.

226 However, it will also operate in conjunction with the PSP summarised above. Certain Selling Shareholders have sold their Scheme A and/or G Shares to the Xchanging B.V. 2007 Employee Benefit Trust. As consideration for these transfers, the Xchanging B.V. 2007 Employee Benefit Trust has agreed to remit the proceeds of the sale of the resulting Shares to the Selling Shareholders on or as soon as reasonably practicable after the date of Admission. For further information of this arrangement, please refer to paragraph 19 of this Part 8: Additional Information.

9. PROPERTY 9.1 No property in the Group accounts for 10% or more of the Group’s annual turnover. All of the Group’s properties are held under leases, including the Company’s registered office and principal place of business located at 34 Leadenhall Street, London EC3A 1AX. 9.2 So far as the Company is aware, there are no environmental issues that may affect the Group’s utilisation of its fixed assets.

10. SUBSIDIARIES 10.1 The Company is the holding company of the Group and has the following significant subsidiary undertakings, each of which is (save where otherwise stated in this paragraph 10.1) incorporated in England and Wales, having its registered office at 34 Leadenhall Street, London EC3A 1AX and is wholly-owned, either directly or indirectly, by the Company and will be consolidated into the annual financial statements of the Company. Xchanging Procurement Services Limited has its registered offices at 13 Hanover Square, London W15 1HN; Xchanging Asia Pacific Sdn Bhd is incorporated in Malaysia and has its registered office at Level 19 Uptown 1, No. 1 Jalen 55, 21/58 Damansara Uptown, Petaling Jaya, 47400 Selangor, Malaysia; Xchanging etb GmbH, Xchanging GmbH and Xchanging Transaction Bank GmbH are all incorporated in Germany and each has its registered office at Wilhelm-Fay-Str. 31-37, Frankfurt 65936; Xchanging Procurement Services Pty Ltd is incorporated in Australia and has its registered office at Tower 2, Level 21, 201 Sussex Street, Sydney NSW 2000; Xchanging Systems and Services Inc. is incorporated in the USA and has its registered office at 8 Campus Dr Ste 2, Parsippany, NJ 07054; and Xchanging Technology Services India Private Ltd is incorporated in India and has its registered office at R-4, Greater Kailash, Phase I, New Delhi-110048, India:

Proportion of nominal value of issued shares controlled by the Group (and proportion of voting rights if Name of company different) (%) Field of activity Direct Subsidiaries of the Company Xchanging B.V...... 100 Holding company Xchanging Holdings Limited ...... 100 Holding company

Indirect Subsidiaries of the Company Ferguson, Snell and Associates Limited...... 100 UK immigration services Ins-sure Services Limited...... 50 Non-life insurance policy and premium processing Landmark Business Consulting Limited...... 100 Business and management consultancy LCO Marine Limited...... 25(50)(1) Non-life Insurance claims handling and processing LCO Non-Marine and Aviation Limited ...... 25(50)(1) Non-life Insurance claims handling and processing London Processing Centre Limited ...... 50 Non-life Insurance premium and policy processing LPSO Limited ...... 50 Non-life insurance policy and premium processing Xchanging Asia Pacific Sdn Bhd...... 100 Software sales and support

227 Proportion of nominal value of issued shares controlled by the Group (and proportion of voting rights if Name of company different) (%) Field of activity Xchanging Broking Services Limited...... 50 Insurance broker administration and processing services Xchanging Claims Services Limited...... 25(50)(1) Insurance claims handling and processing Xchanging etb GmbH...... 51(100)(2) Holding company for securities transaction processing Xchanging Global Insurance Solutions Limited.. 100 Software consultancy and supply Xchanging GmbH...... 100 Business development Xchanging HR Services Limited ...... 100 HR administration Xchanging Insurance Professional Services Limited...... 100 Business and management consultancy Xchanging Insurance Technical Services Limited...... 50 Regulated insurance administration Xchanging Procurement Services Limited ...... 100 Holding company Xchanging Procurement Services Pty Ltd...... 100 Procurement services Xchanging Resourcing Services Limited ...... 100 Recruitment services Xchanging Systems and Services Inc...... 100 Software sales and implementation Xchanging Technology Services India Private Ltd ...... 100 Application development and business processing services Xchanging Transaction Bank GmbH...... 51(100)(2) Securities transaction processing Xchanging UK Limited...... 100 Business and management consultancy

(1) Whilst the proportion of the nominal value of the shares held is 25%, the proportion of the voting rights held is 50% and the economic interest is approximately 50%.

(2) The Group has 100% voting rights with respect to shareholder resolutions, although Deutsche Bank has voting rights only in relation to certain reserved matters to protect Deutsche Bank against an undue derogation of its business and strategic interest as a minority shareholder.

11. PENSIONS The employing companies in the Group and the Enterprise Partnerships (together the ‘‘Xchanging Employers’’) provide pension benefits to employees through a number of different pension arrangements. Some of these are defined benefit arrangements, and some of these are defined contribution arrangements. Paragraphs 11.1 to 11.3 below are concerned with the UK arrangements, paragraph 11.4 is concerned with the German arrangements and paragraph 11.5 with defined contribution pension arrangements elsewhere. 11.1 UK Defined Benefit Schemes—General Currently Xchanging Employers operate two UK pension schemes that provide benefits on a final salary basis. These are: The Rebus Insurance Service Limited Final Salary Pension Scheme (2003) (the ‘‘Rebus Scheme’’) and the London Processing Centre Limited Retirement and Death Benefits Scheme (the ‘‘LPC Scheme’’). Xchanging Employers also participate in final salary pension schemes operated by BAE Systems. These schemes are: the BAE Systems Pension Scheme, BAE Systems 2000 Plan, Royal Ordnance Pension Scheme, BAE Systems (VSEL) Section of the Shipbuilding Industries Pension Scheme, BAE Systems Executive Pension Scheme and the Alvis Pension Scheme (collectively the ‘‘BAE Schemes’’). Xchanging Employers also participate in a final salary scheme operated by Lloyd’s (the ‘‘Lloyd’s Pension Scheme’’). Certain Xchanging Employers may set up a new final salary scheme within the next 12 months to accommodate staff that will leave the Lloyd’s Pension Scheme. Finally certain Xchanging Employers may, at some stage in the future, be required

228 to set up final salary arrangements to provide benefits for employees associated with the University Hospital Birmingham contract or the BAE Systems contract. 11.1.1 The Rebus Scheme The Rebus Scheme is a multi-employer, funded final salary pension scheme providing benefits to and in respect of members on retirement, ill health and death. As at 1 May 2006 The Rebus Scheme had 564 beneficiaries (including pensioners, deferred pensioners and current employees); it is operated on the basis that it is closed to new entrants. J. Boyle of SBJ Benefit Consultants Limited, One Hundred Whitechapel, London is the scheme actuary and is a Fellow of the Faculty of Actuaries. The Rebus Scheme was established on 1 April 2003 as part of the arrangements that lead to the relevant Xchanging Employers becoming part of the Group. Following the establishment of the Rebus Scheme, a bulk transfer of assets and liabilities was effected such that the Rebus Scheme became responsible for the liabilities relating to the past service of employees who had previously been in the Rebus Group Pension Scheme (the previous scheme operated by the seller) and a share of the pensioners and deferred pensioners who had been in that scheme. There has been one formal valuation of the Rebus Scheme since its establishment. The effective date of this valuation was 1 April 2004. As at 1 April 2004 the deficit on the ongoing funding basis was £11.811 million. Following this valuation, it was agreed between the employers and the Rebus Scheme trustees that the employer would pay contributions at the rate of 19.6% of Pensionable Salaries in respect of those who joined the predecessor scheme pre 1 April 1992 and 14.6% of Pensionable Salaries in respect of those who joined the predecessor scheme after 1 April 1992; this is currently equivalent to £1.4 million per annum. During 2006 the trustees and employers agreed that the employers will make additional contributions to fund the Rebus Scheme at a fixed rate of £1 million per annum from 1 October 2006. While not referred to in the current Schedule of Contributions, these additional contributions will be paid until the next Schedule of Contributions is finalised following the next formal valuation due as at 1 April 2007. This valuation will be the first valuation of the scheme under the new scheme specific funding regime. Xchanging Global Insurance Systems Limited is not an employer in the Rebus Scheme but has given a guarantee to the trustees of the Rebus Scheme in respect to the employers obligations to pay contributions to be Rebus Scheme up to a specified amount. Further information on the funding status of the Rebus Scheme is contained in note 35 of Section A of Part 5: Accountants’ Reports and Financial Information. 11.1.2 The LPC Scheme The LPC Scheme is a multi-employer, funded pension scheme which operates on both a final salary and defined contribution basis. The LPC Scheme was first established by interim deed on 30 December 1993 to provide benefits for former members of the London Insurance and Reinsurance Market Association Retirement Benefits Scheme and the Pension Scheme of the Institute of London Underwriters. The LPC Scheme provides benefits to and in respect of members on retirement, ill health and death. As at 30 June 2006 the LPC Scheme had 658 beneficiaries (including pensioners, deferred pensioners and current employees); it is operated on the basis that it is closed to new entrants. N. Dodd of Mercer Human Resource Consulting Limited, Tower Place, London is the scheme actuary and is a Fellow of the Institute of Actuaries. The trustees have typically carried out formal actuarial valuations of the LPC Scheme every three years. The effective date of the last valuation was 1 July 2004 and showed a deficit on the ongoing funding basis of £5.127 million but this included allowance for certain discretionary pension increases the granting of which is controlled by the relevant Xchanging Employer. The granting of these increases has been suspended. If no allowance were made for discretionary pension increases the 1 July 2004 valuation would have revealed a surplus of £1.485 million. Following this valuation, it was agreed between the employers and trustees of the LPC Scheme that the employers would pay contributions at the rate of 21.3% of pensionable salaries; this is currently equivalent to approximately £600,000 per annum. It

229 should be noted that if the relevant Xchanging Employer were to reinstate discretionary pension increases this would reduce the funding level of the scheme. Further information on the funding status of the LPC Scheme is contained in note 35 of Section A of Part 5: Accountants’ Reports and Financial Information. The defined contribution part of the scheme is non-contributory for members with the employer paying 7.5% of basic salary into members’ personal accounts. Annuities are purchased at retirement to provide pensions in respect of any members not transferring their personal accounts to the defined benefit section. Members of the defined contribution section are eligible to join the defined benefit section between ages 35 and 41. If they wish to do so, members can purchase additional years and months of pensionable service on the defined benefit basis using their personal account. The terms on which pensionable service is granted are not neutral on the current funding or accounting basis to the financial position of the LPC Scheme. Of the 26 members at 1 July 2006 in the defined contribution section, 22 are under age 41 and thus have the option to transfer to the defined benefit section now or in future. If all such members were to exercise this option this would reduce the funding levels in the scheme. 11.1.3 Participation in the Lloyd’s Pension Scheme As part of the Enterprise Partnership entered into with Lloyd’s during 2001, three Xchanging Employers currently participate in the Lloyd’s Pension Scheme, which is a final salary pension scheme. These companies are LCO Marine Limited, LCO Non-Marine Limited and LPSO Limited (the ‘‘Lloyd’s Participating Companies’’). As at 31 January 2007 253 Xchanging employees were active members of the Lloyd’s Pension Scheme. A fourth Xchanging Employer, Ins-Sure Services Limited, previously participated in the Lloyd’s Pension Scheme but ceased to do so in April 2006. New employees of the Lloyd’s Participating Companies are offered membership of the Skandia defined contribution arrangement explained in more detail at paragraph 11.2 below. Were the Lloyd’s Scheme to wind up while the Lloyd’s Participating Companies were in the scheme, the Lloyd’s Participating Companies would be liable for a share of the debts under section 75 of the Pensions Act 1995 (‘‘Section 75 debts’’) and if Lloyd’s were insolvent this liability could be material. Xchanging has indemnity protection in its contractual arrangements with Lloyd’s to cover this. In addition, notice has been served requiring the relevant employers to exit the Lloyd’s Pension Scheme which should in due course crystallise the indemnity and eliminate this risk going forward. The participation of the Lloyd’s Participating Companies is governed by the terms of agreements for the sale and purchase of the shares of those companies (the ‘‘Participation Arrangements’’) (see paragraph 18.1 of Part 8: Additional Information for a description of the sale and purchase agreements more generally). One of the key terms of the Participation Arrangements is that contributions paid to the Lloyd’s Pension Scheme are to equal the cost of future benefit accrual and do not reflect any surplus or deficit in the Lloyd’s Pension Scheme. Based on the current salary roll of the Lloyd’s Participating Companies, cash contributions in respect of the first six months of 2007 are likely to be approximately £0.7 million. The Participation Arrangements also provide for the Lloyd’s Participating Companies to leave the Lloyd’s Pension Scheme at the option of either Lloyd’s or the Group after 2006 and Lloyd’s has served notice requiring the Lloyd’s Participating Companies to leave effective on and from 1 July 2007. This exit will trigger a Section 75 debt estimated to be in the region of £10 million to be paid by the existing employers to the Lloyd’s Pension Scheme. However, Xchanging has indemnity protection in its contractual arrangements with Lloyd’s to cover this debt. It is proposed that the employees of the Lloyd’s Participating Companies will be offered two alternative forms of future pension provision after exit. This will be either (i) membership of a contributory defined benefit scheme; or (ii) membership of a non-contributory defined contribution pension plan. If there is insufficient interest expressed in the stand-alone defined benefit scheme it will not be established. Ultimately, the cost of pension provision in

230 the new arrangements will depend on the take-up of the two options. It is broadly estimated by Xchanging that the initial cash cost will be around 20% of pensionable salary or £1.4 million per annum. In addition to the Lloyd’s Participating Companies, Ins-Sure Services Limited participated in the Lloyd’s Pension Scheme from 15 December 2003 until 1 April 2006 but it was not indemnified against any Section 75 debts; it incurred a Section 75 debt on 1 April 2006. Lloyd’s have advised that the total Section 75 debt is approximately £1 million of which Xchanging estimates £250,000 relates to Ins-Sure Services Limited. Once the Xchanging Employers in the Lloyd’s Pension Scheme have ceased to employ any active members and have paid the Section 75 debt due from them there is no further obligation to make payments under the terms of the Lloyd’s Pension Scheme. There is however a structural risk created by the legal framework of the Pensions Act 2004 that the Xchanging Employers could be called upon by the Pensions Regulator under the moral hazard regime while they are still participating and for up to 12 months (in respect of financial support directions) or 6 years (in respect of contribution notices) after they have ceased to provide additional support to the Lloyd’s Pension Scheme (see paragraph 11.3.2 below for an explanation of the moral hazard provisions). The relevant employers have been in consultation with employee representatives since November 2006 in relation to the exit of the Lloyd’s Participating Companies from Lloyd’s Pension Scheme. Any change relating to employees’ pensions has the ability to trigger employee relations issues. However, management has designed the replacement arrangement to be at a level intended to mitigate the risk of such issues arising. 11.1.4 BAE Systems XHRS and XPS (together the ‘‘BAE Participating Employers’’) participate in the BAE Schemes for certain existing employees. As at 10 January 2007, 165 employees of the BAE Participating Employers were active members of the BAE Schemes. New employees of the BAE Participating Employers are offered membership of the Skandia defined contribution arrangement which is explained in greater detail below. Were any of the BAE Schemes to wind-up, while the BAE Participating Employers were in the scheme, the BAE Participating Employers would be liable for a share of the total Section 75 debt. The BAE Participating Employers have an indemnity from BAE Systems in respect of this. The participation of XHRS and XPS in the BAE Schemes means that in the event of BAE becoming insolvent, there is a risk that XHRS and XPS (and any other participating employer) could become liable to fund an increased part of the wider BAE Schemes. In the extreme, XHRS or XPS could become liable to fund the entirety of one or all of the wider BAE Schemes by virtue of the Section 75 debt and in the extreme if no other participating employer is able to contribute the Group could become liable to fund the entirety of one or all of the defined benefit pension schemes in an amount which would materially exceed the Group’s financial resources. The BAE Participating Employers began participating in the BAE Schemes in 2001 when the enterprise partnerships between the Group and BAE Systems began. The key terms of participation are set out in the sale and purchase agreements with BAE Systems (see paragraph’s 18.6 and 18.8 of this Part 8: Additional Information for a description of the wider agreement in relation to XHRS and XPS) and are as follows: (a) participation is for a closed class of employees and the number of employees in the class will reduce over time through staff turnover. Participation will be until at least December 2012 (unless all the relevant staff have left a particular scheme before then or the trustees give 3 months notice that the employer must leave); (b) the BAE Participating Employers pay the future service contribution rates (which may vary) and pay a combination of fixed proportions of pensionable salary (which will not vary) and fixed cash amounts (which will not vary) towards the current deficit in the BAE Schemes. The BAE Participating Employers’ share of the PPF levy will

231 also be a fixed amount unless the employers’ credit score deteriorates materially for reasons that Xchanging could have prevented. It is estimated that the BAE Participating Employers’ contributions to the BAE Scheme will be approximately £1.2m for 2007; (c) if a BAE Participating Employer leaves a BAE Scheme when it still employs members of that scheme and (i) the BAE Participating Employers are still providing services to BAE Systems; and (ii) the BAE Participating Employer chooses or is required to leave, the BAE Participating Employer must set up a final salary scheme and accept a past service transfer (which will likely include a share of deficit); (d) if a BAE Participating Employer leaves a BAE Scheme in circumstances other than those described in 11.1.4(c) above that employer is not required to set up a final salary scheme or accept a past service transfer; and (e) if a Section 75 debt is triggered against a BAE Participating Employer or the trustees of any BAE Scheme demand contributions in excess of the amounts specified in the agreement, BAE Systems will indemnify the employer with the exception of a very small group of employees for whom Xchanging retains the Section 75 debt risk (currently there are 8 employees in this group). 11.1.5 UHB The Group provides services to University Hospital Birmingham (‘‘UHB’’) through a management contract but does not employ staff who are currently eligible to participate in the NHS Pension Scheme. The contract with UHB includes arrangements whereby the Group may be required to purchase the part of the UHB business that it currently manages. This put option, which could be exercised in 2011, might result in a TUPE transfer of employees to a new company that would be owned by Xchanging. If this happens the contract provides that pensions will be treated in line with statutory requirements and government guidance. Current government guidance requires a final salary scheme to be established and members invited to transfer their past service benefits. The contract with UHB states that to the extent that the Group takes on any liabilities, XHRS and the Group must use their reasonable endeavours to ensure an amount determined by the Government Actuary’s Department (GAD) is transferred. In addition UHB is required to use its best endeavours to pay further ‘‘top-up’’ amount so that the liabilities would be fully funded on a risk free basis at the time the transfer takes place. 11.1.6 Xchanging Broking Services Limited On 1 September 2006 Xchanging entered into an Enterprise Partnership with Aon Consulting Ltd, with the establishment of Xchanging Broking Services Limited and the transfer of staff from Aon. New employees of Xchanging Broking Services Limited are offered membership of the AXA Plan described below. Approximately 475 of the employees that transferred from Aon became members of the AXA Plan on enhanced terms. As these employees transferred on 1 September 2006, only four months’ contributions were reflected in the year end accounts. The full year cost is expected to be approximately £1.8 million. 11.2 UK Defined Contribution Arrangements The Group operates a number of defined contribution schemes in the UK and as at 31 January 2007 there were 989 employees of the Group eligible to join the defined contribution schemes who have not done so. If they were to do so immediately, employer contributions could increase by £1.5 million per annum. Within these schemes there are different contribution structures; some of which are age-related, some service-related and some based on a ‘‘matching’ approach. The schemes are as follows: (a) The Xchanging Stakeholder Pension Plan (administered with AXA) (the ‘‘AXA Plan’’) which as at 31 January 2007 had 468 Active Members;

232 (b) The Xchanging Skandia Executive Pension Scheme (an occupational defined contribution pension scheme) (the ‘‘Skandia Scheme’’) which as at 31 January 2007 had 301 Active Members; and (c) The Rebus IS Group Stakeholder Pension Plan (administered with Scottish Equitable) (the ‘‘Rebus Plan’’) which as at 31 January 2007 had 67 Active Members. All new employees across the Group in the UK (with the exception of Xchanging Broking Services Limited) are currently offered membership of the Skandia Scheme or the Rebus Plan (depending on employer). 11.3 Regulatory and Legal Environment Relating to Pensions 11.3.1 Pensions Act 1995 As the Rebus and LPC Schemes have several employers there are risks of Section 75 debts falling due in future when employers cease to participate in either of the schemes. This is a statutory debt which is triggered under Section 75 of the Pensions Act 1995 in certain circumstances, including when an employer exits a multi-employer defined benefit scheme when there is a deficit in the scheme on the ‘‘buy out’’ basis. Generally the ‘‘exiting’’ employer must pay a debt equal to a proportion of the total buy out deficit. Any debt paid in by an exiting employer will improve the funding position of the scheme and so ultimately reduce the contingent liability on the remaining Xchanging Employers although the accounting and cash flow consequences may be unpredictable. The Group will monitor changes in employee numbers in employers in both the Rebus and LPC Scheme to manage the risk of debts inadvertently falling due. For Section 75 debt issues in relation to Lloyd’s and BAE please see paragraphs 11.1.3 and 11.1.4 above. A Section 75 debt is also triggered when a pension scheme winds up. As of 1 May 2006 the actuary of the Rebus Scheme estimated that if a Section 75 wind-up debt were to be triggered it would be approximately £75 million. As at 1 July 2004 the actuary of the LPC Scheme estimated that if a Section 75 wind-up debt were to be triggered it would be approximately £20 million. Under the Rebus Scheme the trustees can wind-up the scheme (i) if the principal employer goes into liquidation; or (ii) if there are no members in either pensionable or insurable service. Under the LPC Scheme the trustees can wind-up the scheme if (i) the actuary certifies that the scheme is insolvent; (ii) the trustees decide on actuarial advice that the contributions paid by the employer are so low that the financial position of the scheme is prejudiced; (iii) the trustees decide that the intention and objects of the scheme have become significantly different to those which were relevant at the start of the scheme; (iv) the Principal Employer fails, in the opinion of the trustees, to comply with any provisions of the scheme and does not remedy this when notified by the trustees; or (v) insolvency of the Principal Employer. Further, if the actuary certifies that there will be insufficient assets to meet the scheme’s liabilities, the trustees have certain powers to trigger a wind-up. Certain Xchanging Employers have in the past participated in other final salary pensions arrangements including the predecessor to the Rebus Scheme (the ‘‘Rebus Group Pension Scheme’’). Where an employer has been in a final salary scheme, there is a risk that it may be required to pay additional contributions under Section 75 even after it has left the scheme if the scheme winds up in the future in deficit or under the ‘‘moral hazard’’ provisions. Provided, however, that the sponsoring employer of a predecessor scheme remains able to support the scheme the risk to the Group companies is low. 11.3.2 Pensions Act 2004 (a) Moral Hazard Under the ‘‘moral hazard provisions’’ of the Pensions Act 2004, the Pensions Regulator has the power to impose Contribution Notices (‘‘CNs’’) and Financial Support Directions (‘‘FSDs’’). CNs can be imposed where the Pensions Regulator is of the opinion that one of the main purposes of an act or failure to act was to prevent recovery of a statutory pensions debt or, otherwise than in good faith, to prevent such debt becoming due or to settle or reduce such debt. The Regulator must also be of the opinion that it is reasonable to impose

233 the CN. A CN may be issued to an employer or a person who is ‘‘connected with’’ or ‘‘an associate of’’ an employer. The categories of ‘‘connected or associate’’ are widely defined and include: (i) other group companies; (ii) one-third shareholders; (iii) directors and employees of the employer; and (iv) persons who are ‘‘connected’’ with a director of the employer. FSDs, in contrast to CNs, do not require avoidance of a debt. FSDs can, like CNs, be imposed on a person or company who is connected with or associated with an employer in a scheme. The Regulator can issue an FSD where it is of the opinion that the participating employer is either a service company or ‘‘insufficiently resourced’’ and it is of the opinion that it is reasonable to impose an FSD. It can require arrangements to be put in place where all group companies are jointly liable or a suitable holding company is liable. The moral hazard provisions have two potential impacts. First the Enterprise Partnerships and the Group could be called upon to provide support to the BAE Schemes or the Lloyd’s Scheme. Second, Xchanging Employers could be called upon to support predecessor schemes. (b) Statutory funding requirements A new scheme-specific funding regime for defined benefit schemes is being introduced under sections 222 to 231 of the Pensions Act 2004. Under the new regime the trustees have specific duties in setting the scheme’s funding arrangements. The regime does not prescribe the funding arrangements which must be adopted, but gives the Pensions Regulator power to issue guidance and to impose funding arrangements in some limited circumstances. The combination of the scheme-specific funding regime and the balance of power in the governing documentation of the Rebus Scheme and LPC Scheme means that the contribution rate must be agreed by the employers and the trustees or failing agreement referred to the Pensions Regulator. The new funding regime will first actively impact on the Rebus Scheme at the next valuation which is due as at 1 April 2007 and on the LPC Scheme at the next valuation which is due as at 1 July 2007. The employer contribution rates in both the Rebus and LPC Scheme will be reviewed at this next valuation. There therefore is uncertainty regarding the company cash contribution rate following the forthcoming valuations of both schemes. The contribution rate determined will depend on a number of factors including the financial position of each scheme at the date of valuation and the degree of prudence adopted in assessing the liabilities of both schemes. The scheme-specific funding regime requires that a ‘‘prudent’’ approach be adopted, but does not define prudence in this context. There is a risk that the assumptions adopted to address the scheme-specific funding regime are likely to be more conservative than those used in the previous valuations. The timescale over which any assessed deficit in both of the schemes is to be removed following the valuations will also have an effect on the contribution rate under the scheme specific funding guidelines, the maximum deficit removal period normally accepted is 10 years, and the trustees may seek a shorter removal period. (c) PPF Levy The Government introduced the Pension Protection Fund (‘‘PPF’’) with effect from April 2005 to provide compensation to members of defined benefit pension schemes which are under-funded and whose employers are insolvent. In order to fund the PPF, levies are raised on defined benefit pension schemes in the UK. Accordingly, the Group is ultimately required to meet the cost of the levy in respect of the both the Rebus and LPC Scheme and to contribute to the cost of the levy for the BAE Schemes (the BAE Participating Employers’ share of the PPF levy will be a fixed amount unless the employers’ credit score deteriorates materially for reasons that Xchanging could have prevented). The levy for the Rebus Scheme for the year 2006 was £28,000. The levy for the LPC Scheme was £21,000. The PPF levy for 2007/08 for both the Rebus Scheme and LPC Scheme is uncertain, and will depend on a number of factors including Dun & Bradstreet ‘‘failure scores’’ for the companies and the financial position of the both schemes at the time of valuation.

234 11.3.4 Equalisation Sex discrimination law requires pension schemes to provide pensions based on the same normal retirement date for men and women for service after May 1990. While the current trust deed and rules for the LPC Scheme and the Rebus Scheme provides for the same normal retirement date for men and women this is a complex and evolving area of the law, with the result that it is possible that there are unrecognised areas in which a scheme’s administration may not be fully compliant with the obligations that flow from this basic principle. Such areas could give rise to additional liabilities. Further, there may be sex discrimination liabilities that arise because the schemes were ‘‘contracted out’’ of the State pension scheme before 1997. On the last point it should be noted however that many other pensions schemes face exactly the same issue and it will only be resolved with assistance from the UK courts or Government. 11.4 German Pension Arrangements Xtb operates three defined benefit schemes. Pension plans VO 78 and VO 84 provide pensions to all regular employees of the company who started employment prior to 31 March 1984 or between 1 April 1984 and 31 December 1995 respectively. Pensions are based on salary and service at retirement, death or disability. Benefits to the employee’s widow/er and orphans are included. Member contributions are not required. Both plans are closed to new entrants. The Cash Balance Plan was set up in 1995 for new joiners from 1 January 1996 and is currently open. Members of the VO 78 and of the VO 84 pension plans were given the opportunity to transfer past service benefits into the Cash Balance Plan and to accrue future service benefits in the Cash Balance Plan. The majority of the VO plan members made use of this opportunity. Under the Cash Balance Plan employees are entitled to a salary-related regular contribution, which, after the application of an age-related actuarial factor, is credited to plan members’ individual ‘‘Benefit Account’’. The balance of the Benefit Account can be claimed by the plan member or his/her descendants as a lump-sum, as instalments or as life-long pension payment in case of retirement, death or disability. Rauser AG of Oskar-Kalbfell-Platz 14, Handelsgesetzbuch is the actuarial firm appointed to all three German defined benefit schemes. As of 30 November 2006 pension plans VO 78 and VO 84 covered 212 active and deferred members and 226 pensioners and the Cash Balance Plan covered 895 active and deferred members employees, of and 24 pensioners. As of 31 December 2006, the balance sheet provisions for the VO 78/VO 84 pension commitments were A25,528,502 (according to German accounting rules stipulated in the German Commercial Code (Handelsgesetzbuch (‘‘HGB’’)) or A36,757,340 (IAS 19) and for the Cash Balance Plan A27,610,800 (HGB) or A36,653,297 (IAS 19), resulting in a total of A53,139.302 (HGB) or A73,410,637 (IAS 19). Although not legally required in Germany, the pension liabilities are supported by way of a Contractual Trust Arrangement (‘‘CTA’’). The CTA, by which Xtb plans are supported, forms a segregated part, which is contractually owned by Xtb, of the Deutsche Bank Pension Fund. Deutsche Bank operates two funds managed by Deutsche Asset Management. There is approx. A2.8 billion in each fund of which approx. A71 million relates to the CTA. The pension liabilities are almost fully financed by means of the CTA, which can be regarded as segregated assets under the provisions of IAS 19. The existence of the CTA does not reduce the pension obligation as shown in the balance sheet and if the assets held under the CTA management by Deutsche Asset Management do not perform additional funding will be required. 11.5 Defined Contribution Arrangements Elsewhere Two Xchanging employers in the United States operate ‘‘401(k) Plans’’: the Xchanging Global Insurance Services (US) Inc 401(k) Profit Sharing Plan and the Xchanging Systems and Services Inc 401(k) Profit Sharing Plan. These are retirement savings plans which accept employer and employee contributions. They are defined contribution arrangements. In Bermuda, Xchanging operates a defined contribution plan: the Pension Plan of Rebus International (BDA) Limited.

235 12. UNITED KINGDOM TAXATION 12.1 General The following statements are only a guide to the general position and are based on current UK taxation legislation and published practice of HMRC both of which are subject to change, possibly with retrospective effect. Except where the position of non-UK residents is expressly referred to, these statements relate solely to persons who are resident or ordinarily resident in the UK for UK tax purposes, who are the beneficial owners of Shares, who hold their Shares as an investment and not as trading stock and who have not (and are not deemed to have) acquired their Shares by reason of an office or employment). The comments below may not apply to certain classes of shareholders such as (but not limited to) dealers in securities, insurance companies and collective investment schemes. If you are in any doubt as to your tax position or if you are subject to tax in a jurisdiction other than the UK, you should consult your own professional advisers. 12.2 Dividends Under current UK taxation legislation, no tax will be withheld at source from dividend payments by the Company. 12.2.1 Individuals UK resident individual shareholders who receive a dividend from the Company will generally be entitled to a tax credit, which can be set off against the individual’s income tax liability on the dividend payment. The rate of tax credit on dividends paid by the Company will be 10% of the total of the dividend payment and the tax credit (the ‘‘gross dividend’’), or one-ninth of the dividend payment. UK resident individual shareholders will generally be taxable on the gross dividend, which will be regarded as the top slice of the shareholder’s income. UK resident individual shareholders who are not liable to income tax in respect of the gross dividend will generally not be entitled to reclaim any part of the tax credit. In the case of a UK resident individual shareholder who is not liable to income tax at the higher rate (taking account of the gross dividend he or she receives), the tax credit will satisfy in full such shareholder’s liability to income tax. To the extent that a UK resident individual shareholder’s income (including the gross dividend) exceeds the threshold for higher rate income tax, such shareholder will be subject to income tax on the gross dividend at 32.5% but will be able to set the tax credit off against this liability. An individual shareholder who is liable to the higher rate of income tax will therefore be liable to income tax equal to 22.5% of the gross dividend (or 25% of the dividend payment). 12.2.2 Companies A corporate shareholder resident in the UK (for tax purposes) will generally not be subject to corporation tax on dividend payments by the Company. Corporate shareholders will not, however, be able to claim repayment of tax credits attaching to the dividend payment. 12.2.3 Non-Residents In general, the right of non-UK resident shareholders to reclaim tax credits attaching to dividend payments by the Company will depend upon the existence and the terms of an applicable double tax treaty between their jurisdiction of residence and the UK. In most cases, the amount that can be claimed by non-UK resident shareholders will be nil as a result of the terms of the relevant treaty. They may also be liable to tax on the dividend income under the tax law of their jurisdiction of residence. Non-UK resident shareholders should consult their own tax advisers in respect of their liabilities on dividend payments, whether they are entitled to claim any part of the tax credit and, if so, the procedure for doing so. 12.2.4 Pension Funds UK resident shareholders who are not liable to income tax, including pension funds, charities and individuals holding shares through a personal equity plan or individual savings account, are not entitled to reclaim the tax credits on dividends paid by the Company. 12.3 Chargeable Gains A disposal of the Shares by a shareholder who is resident or, in the case of an individual, ordinarily resident for tax purposes in the UK, or a shareholder who is neither resident nor ordinarily resident

236 in the UK for tax purposes, but who carries on a trade, profession or vocation in the UK through a permanent establishment (where the shareholder is a company) or through a branch or agency (where the shareholder is not a company) and has used, held or acquired the Shares for the purposes of such trade, profession or vocation or such permanent establishment, branch or agency (as appropriate) may, depending on the shareholder’s circumstances and subject to any available exemption or relief, give rise to a chargeable gain or an allowable loss for the purposes of UK taxation on chargeable gains. An individual shareholder who for a period of less than five years either has ceased to be resident and ordinarily resident for tax purposes in the UK or has become resident in a territory outside the UK for purposes of double taxation relief arrangements and who disposes of the Shares during that period, may be liable on his or her return to the UK to UK capital gains tax on any chargeable gain realised. Nothing in any double taxation relief arrangements shall prevent such an individual from being subject to UK capital gains tax in those circumstances. For shareholders who are subject to capital gains tax, taper relief (which reduces the percentage of the gain chargeable by reference to how long the shares have been held) may be available to reduce the amount of chargeable gain realised as a disposal of the Shares. Prior to the listing of the Company’s Shares, the Shares currently held by shareholders should qualify for business assist taper relief (‘‘BATR’’). Once the Shares are listed on the full market, BATR will only be available to individuals who are shareholders and employees or officers of the Company or who are shareholders with 5% or more of the voting rights. For Shares which qualify for BATR and which are held for a period greater than two years the percentage of the chargeable gain is reduced by 75%. 12.4 UK Inheritance and Gift Taxes Shares beneficially owned by an individual shareholder will be subject to UK inheritance tax on the death of the shareholder (even if the shareholder is not domiciled or deemed domiciled in the UK). For UK inheritance tax purposes, a transfer of assets to another individual or trust could potentially be subject to UK inheritance tax, based on the loss of value to the donor. Particular rules apply to gifts where the donor reserves or retains some benefit. UK inheritance tax is not chargeable on gifts to individuals or if the transfer is made more than seven complete years prior to death of the donor. Special rules apply to close companies and to trustees of settlements who hold shares, which could bring them within the charge to UK inheritance tax. Shareholders should consult an appropriate professional adviser if they intend to make a gift of any kind or intend to hold any Shares through trust arrangements. They should also seek professional advice in a situation where there is a potential for a double charge to UK inheritance tax and an equivalent tax in another country. 12.5 Stamp Duty and Stamp Duty Reserve Tax (‘‘SDRT’’) In relation to the New Shares being issued by the Company, no liability to stamp duty or SDRT will arise on the issue of, or on the issue of definitive Share certificates in respect of, such shares by the Company other than in circumstances involving depositary receipts or clearances services referred to below. Holders of Shares will be registered on the Company’s register in the UK. Shareholders who are ‘‘system members’’ of CREST may elect to hold their Shares in CREST for trading on the main market. The conveyance or transfer on sale of Shares held in certificated form will generally be subject to ad valorem stamp duty on the instrument of transfer at the rate of 0.5% of the amount of value of the consideration given (rounded up if necessary to the nearest multiple of £5). Stamp duty is normally paid by the purchaser of the Shares. An unconditional agreement to transfer Shares will normally give rise to a charge to SDRT at the rate of 0.5% of the amount or value of the consideration for the Shares. However, where within six years of the date of the agreement an instrument of transfer is executed and duly stamped, the SDRT liability will be cancelled and any SDRT which has been paid will be repaid. SDRT is normally the liability of the purchaser of the Shares. Where Shares are issued or transferred: (i) to, or to a nominee for, a person whose business is or includes the provision of clearance services; or (ii) to, or to a nominee or agent for, a person whose

237 business is or includes issuing depositary receipts, stamp duty (in the case of a transfer only to such person) or SDRT may be payable at a rate of 1.5% (rounded up if necessary, in the case of stamp duty, to the nearest multiple of £5) of the amount or value of the consideration payable or, in certain circumstances, the value of the Shares. This liability for stamp duty or SDRT will strictly be accountable by the depositary or clearance service operator or their nominee, as the case may be, but will in practice generally be reimbursed by participants in the clearance service or depositary receipt scheme. Clearance service providers may opt under certain circumstances for the normal rates of SDRT (0.5% of the consideration paid) to apply to issues or transfers of Shares into, and to transactions within, the service instead of the higher rate applying to an issue or transfer of Shares into the clearance service, in which case a liability to SDRT would arise (at the rate of 0.5% of the consideration paid) on any subsequent transfers of Shares whilst in the service. Paperless transfers of Shares within CREST are generally subject to SDRT, rather than stamp duty, at the rate of 0.5% of the amount or value of the consideration payable. CREST is obliged to collect SDRT on relevant transactions settled within the system. Deposits of Shares in CREST will generally not be subject to SDRT or stamp duty, unless the transfer into CREST is itself for consideration in money or money’s worth, in which case a liability to SDRT will arise, usually at the rate of 0.5% of the value of the consideration. Special rules apply to agreements made by market intermediaries in the ordinary course of their business. Prospective purchasers of Shares should consult their own tax advisors with respect to the tax consequences to them of acquiring, holding and disposing of Shares.

13. TAXATION OF US RESIDENT SHAREHOLDERS The discussion of US tax matters set forth in this prospectus was written in connection with the making of the Global Offer and was not intended or written to be used, and cannot be used, by a prospective investor for the purpose of avoiding tax-related penalties under US federal, state or local tax law. Each prospective investor should seek advice based on its particular circumstances from an independent tax advisor. The following summary is a general discussion of certain US federal income tax considerations to US Holders (as defined below) of acquiring, holding and disposing of Shares. The following summary applies only to US Holders that purchase Shares in the Global Offer, will hold Shares as capital assets for US federal income tax purposes (generally, assets held for investment) and that are not residents of, or ordinarily resident in, the United Kingdom for tax purposes nor hold their Shares as part of a permanent establishment in the United Kingdom. The following summary is not a complete analysis of all US federal income tax consequences that may be relevant to a prospective US Holder’s decision to acquire, hold or dispose of Shares, including, in particular, US federal income tax consequences that apply to prospective US Holders subject to special tax rules, including, among others, financial institutions, insurance companies, real estate investment trusts, regulated investment companies, dealers or traders in securities or currencies, tax-exempt entities, US Holders that will hold Shares as part of an ‘‘integrated’’, ‘‘hedging’’ or ‘‘conversion’’ transaction or as a position in a ‘‘straddle’’ for US federal income tax purposes, grantor trusts, US Holders that have a ‘‘functional currency’’ other than the US dollar, US Holders that will own (directly or by attribution) 10% or more (by voting power) of our stock and certain US expatriates or US Holders subject to the alternative minimum tax. This summary does not address the US federal income tax consequences of making an election to receive dividends in pounds sterling. This summary does not discuss the tax consequences of the purchase, ownership or disposition of Shares under the tax laws of any US state, locality or foreign jurisdiction. Prospective investors considering an investment in Shares should consult their own tax advisors in determining the US federal, state, local and non-US jurisdiction, and any other tax consequences to them of an investment in Shares and the purchase ownership and disposition thereof. The following summary is based on the US Internal Revenue Code of 1986, as amended (the ‘‘Code’’), US Treasury Regulations thereunder, published rulings of the US Internal Revenue Service (the ‘‘IRS’’), the income tax treaty between the United States and the United Kingdom (the ‘‘US-UK Treaty’’) and judicial and administrative interpretations thereof, in each case as in effect and available on the date of this document. Changes to any of the foregoing, or changes in how any of

238 these authorities are interpreted, may affect the tax consequences set out below, possibly retroactively. No ruling will be sought from the IRS with respect to any statement or conclusion in this discussion, and we cannot assure you that the IRS will not challenge such statement or conclusion in the following discussion or, if challenged, that a court would uphold such statement or conclusion. For purposes of this section, a ‘‘US Holder’’ is a beneficial owner of Shares that is for US federal income tax purposes: (i) a citizen or resident alien of the United States; (ii) a corporation or other entity treated as a corporation for US federal income tax purposes created or organised in or under the laws of the United States or any state thereof (including the District of Columbia); (iii) an estate, the income of which is subject to US federal income taxation regardless of its source; or (iv) a trust if (x) a court within the United States is able to exercise primary supervision over its administration and (y) one or more United States persons (as defined in the Code) have the authority to control all of the substantial decisions of such trust. If a partnership (including any entity treated as a partnership for US federal income tax purposes) holds Shares, the US federal income tax consequences to the partners of such partnership will depend on the activities of the partnership and the status of the partners. A partnership considering an investment in Shares, and partners in such partnership, should consult their own tax advisors about the consequences of the investment. Prospective purchasers of Shares should consult their own tax advisers with respect to the US federal, state, local and non-US tax consequences to them in their particular circumstances of acquiring, holding, and disposing of, Shares.

13.1 Distributions by the Company

Subject to the discussion under section 13.3, ‘‘Passive foreign investment company’’ below, the US dollar amount of any distribution by us with respect to Shares will generally be includible in a US Holder’s ordinary income as a dividend to the extent of our current and accumulated earnings and profits (as determined under US federal income tax principles) at the time the US Holder receives (or constructively receives) such amount in accordance with the US Holder’s usual method of accounting for US federal income tax purposes. Any distribution in excess of our current and accumulated earnings and profits will be treated first as a tax-free return of capital to the extent of a US Holder’s adjusted tax basis and thereafter as capital gain. However, the Company does not maintain calculations of its earnings and profits in accordance with US federal income tax accounting principles. US Holders should therefore assume that any distribution by the Company with respect to Shares will constitute ordinary dividend income. US Holders should consult their own tax advisors regarding how to account for distributions paid in currency other than the US dollar and the consequences of disposing of such payments. Dividends paid by the Company will not be eligible for the dividends received deduction in the hands of corporate US Holders. Certain dividends received by certain non-corporate tax payers through taxable years beginning on or before 31 December 2011 are subject to a reduced maximum tax rate of 15% so long as: (i) specified holding period requirements are met; (ii) the taxpayer is not under an obligation (whether pursuant to a short sale or otherwise) to make related payments with respect to positions in substantially similar or related property; (iii) the Group is a ‘‘qualified foreign corporation’’; and (iv) the Group is not a passive foreign investment company (‘‘PFIC’’) in the year of distribution or the prior year. The Group generally will be treated as a qualified foreign corporation with respect to any dividend it pays if it qualifies for the benefits of the US-UK Treaty. The Group expects to qualify for the benefits of the US-UK Treaty, and thus be a qualified foreign corporation, so long as its shares are regularly traded on the London Stock Exchange. Dividends on a Share will be treated as foreign source income for US foreign tax credit purposes. The limitation on non-US taxes eligible for credit is calculated separately with respect to specific classes of income. The US foreign tax credit rules are very complex, and each US Holder should consult its own tax advisor concerning the availability and the utilisation of the foreign tax credit.

13.2 Proceeds from the Sale, Exchange or Retirement of the Shares Subject to the discussion under ‘‘Passive foreign investment company’’ below, upon the sale, exchange or retirement of Shares, a US Holder will generally recognise US source capital gain or

239 loss equal to the difference, if any, between the US dollar value of the amount realised on the sale, exchange or retirement and the US Holder’s tax basis in the Shares. The US Holder’s tax basis will generally be the US dollar value of the amount paid for the Shares. Any gain or loss generally will be long-term capital gain or loss if the Shares have been held for more than a year. The deductibility of capital losses is subject to limitations. US Holders should consult their own tax advisors regarding how to account for the receipt of proceeds from the sale, exchange or retirement of Shares in a currency other than the US dollar and the consequences of disposing of such payments.

13.3 Passive foreign investment company The Group does not expect to be classified as a PFIC. However, because PFIC status depends upon the composition of the Group’s income and assets and the market value of its assets from time to time, as well as its spending of its cash balances and the proceeds of the Global Offer, the Group cannot assure US Holders that it will not be considered a PFIC for any taxable year. In general, a non-US corporation will be classified as a PFIC if in any taxable year either: (i) 75% or more of its gross income consists of passive income (e.g., dividends, interest and certain rents and royalties); or (ii) 50% or more of its assets, by value, determined on the basis of a quarterly average, consists of assets that produce, or are held for the production of, passive income. If the Group were classified as a PFIC, a US Holder could be subject to significantly greater amounts of US tax than would otherwise apply with respect to: (i) any gain on the sale or exchange of Shares; or (ii) certain dividends. Additionally, dividends the Company pays would not be eligible for the special reduced rate described above under ‘‘Distributions by the Company’’. The US Holder would also be subject to more burdensome US tax reporting obligations. US Holders should consult their tax advisers concerning the application of the PFIC rules to us and alternative tax reporting methods that may be available.

13.4 Backup withholding and information reporting requirements US federal backup withholding and information reporting requirements may apply to certain payments of dividends on, and proceeds from the sale, taxable exchange or redemption of, Shares held by a US Holder unless the US Holder establishes it is exempt from these rules. If it does not, a portion of any such payment may be withheld as a backup withholding against such US Holder’s potential US federal income tax liability if such US Holder fails to furnish its correct taxpayer identification number or otherwise fails to comply with these rules. Corporate US Holders are generally exempt from the backup withholding and information requirements, but may be required to comply with certification and identification requirements in order to prove their exemption. Any amounts withheld under the backup withholdings rules from a payment to a US Holder will be credited against such US Holder’s federal income tax liability, if any, or refunded if the amount withheld exceeds such US Holder’s tax liability, provided the required information is furnished to the IRS. The above summary is not intended to constitute a complete analysis of all US federal income tax consequences to a US Holder of acquiring, holding, and disposing of, Shares. Each US Holder should consult its own tax advisor with respect to the US federal, state, local and non-US consequences of acquiring, holding and disposing of Shares.

14. SECURITIES LAWS The distribution of this document and the offer of Shares in certain jurisdictions may be restricted by law and therefore persons into whose possession this document comes should inform themselves about and observe any restrictions, including those set out in the paragraphs that follow. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction.

14.1 United States of America General The Shares have not been, and will not be, registered under the Securities Act or the applicable securities laws and regulations of any state of the United States and, subject to certain exceptions may not be offered or sold in the United States. Accordingly, the Underwriters may offer Shares:

240 (i) only through qualified affiliates or agents to persons reasonably believed to be Qualified Institutional Buyers in reliance on the exemption from the registration requirements of the Securities Act provided by Rule 144A or another exemption from, or transaction not subject to, the registration requirements of the Securities Act; and/or (ii) in compliance with Regulation S under the Securities Act. In addition, until the expiration of 40 days after the commencement of the Global Offer, an offer or sale of Shares within the United States by a dealer that (whether or not participating in the Global Offer) may violate the registration requirements of the Securities Act unless made pursuant to Rule 144A or another exemption from the registration requirements of the Securities Act.

Transfer Restrictions Due to the following restrictions, purchasers of Shares in the United States are advised to consult legal counsel prior to making any offer for, resale, pledge or other transfer of the Shares. 14.1.1 Each purchaser in the United States of the Shares offered hereby will be deemed to have represented and agreed that it has received a copy of the document and such other information as it deems necessary to make an investment decision and that (terms used herein that are defined in Rule 144A or Regulation S under the Securities Act are used herein as defined therein): (a) it is: (i) a Qualified Institutional Buyer (‘‘QIB’’); (ii) acquiring such Shares for its own account or for the account of one or more Qualified Institutional Buyers with respect to whom it has the authority to make, and does make, the representations and warranties set forth herein; (iii) is not acquiring the Shares with a view to further distribution of such Shares; and (iv) is aware and each beneficial owner of such Shares has been advised, that the sale of Shares to it is being made in reliance on Rule 144A or another exemption from, or transaction not subject to, the registration requirements of the Securities Act; (b) it understands that the Shares have not been and will not be registered under the Securities Act or with any securities regulatory authority of any state or other jurisdiction of the United States and may not be reoffered, resold, pledged or otherwise transferred except: (A) (i) to a person who the purchaser and any person acting on its behalf reasonably believes is a QIB purchasing for its own account or for the account of a QIB in a transaction meeting the requirements of Rule 144A; (ii) in an offshore transaction complying with Rule 903 or Rule 904 of Regulation S; or (iii) pursuant to an exemption from registration under the Securities Act provided by Rule 144 thereunder (if available) and (B) in accordance with all applicable securities of laws of the States of the United States; (c) it acknowledges that the Shares (whether in physical certificated form or in uncertificated form held in CREST) offered and sold hereby in the manner set forth in paragraph 14.1.1(a) above are ‘‘restricted securities’’ within the meeting of Rule 144(a)(3) under the Securities Act are being offered and sold in a transaction not involving any public offering in the United States within the meaning of the Securities Act and that no representation is made as to the availability of the exemption provided by Rule 144 for resales of Shares. The purchaser understands that the Shares may not be deposited into any unrestricted depositary receipt facility in respect of Shares established or maintained by a depositary bank, unless and until such time as such Shares are no longer restricted securities within the meaning of Rule 144(a)(3) under the Securities Act; (d) it understands that any offer, sale, pledge or other transfer of the Shares made other than in compliance with the above-stated restrictions may not be recognised by the Company; and

241 (e) the Shares (to the extent they are in certificated form), unless otherwise determined by the Company in accordance with applicable law, will bear a legend substantially to the following effect: THE SECURITY EVIDENCED HEREBY HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE US SECURITIES ACT OF 1933, AS AMENDED (THE ‘‘SECURITIES ACT’’) OR WITH ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) (1) TO A PERSON WHOM THE SELLER AND ANY PERSON ACTING ON ITS BEHALF REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT OR (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) AND (B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES. NO REPRESENTATION CAN BE MADE AS TO THE AVAILABILITY OF THE EXEMPTION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT FOR THE RESALE OF THIS SECURITY. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THE FOREGOING, THIS SECURITY MAY NOT BE DEPOSITED INTO ANY UNRESTRICTED DEPOSITARY RECEIPT FACILITY IN RESPECT OF SHARES OF THE COMPANY ESTABLISHED OR MAINTAINED BY A DEPOSITARY BANK. EACH HOLDER, BY ITS ACCEPTANCE OF THIS SECURITY REPRESENTS THAT IT UNDERSTANDS AND AGREES TO THE FOREGOING RESTRICTIONS. 14.1.2 Each purchaser of the Shares offered hereby in reliance on Regulation S will be deemed to have represented and agreed that it has received a copy of this document and such other information as it deems necessary to make an investment decision and that: (a) it is aware that the Shares have not been and will not be registered under the Securities Act or with any securities regulatory authority of any state or other jurisdiction of the United States; (b) it is purchasing the Shares in an offshore transaction meeting the requirements of Regulation S; and (c) it will not offer, sell, pledge or transfer any Shares, except in accordance with the Securities Act and any applicable laws of any state of the United States and any other jurisdiction. 14.2 Australia This document does not constitute a disclosure document under Part 6D.2 of the Corporations Act 2001 of the Commonwealth of Australia (the ‘‘Australian Corporations Act’’) and will not be lodged with the Australian Securities and Investments Commission. The Shares will be offered to persons who receive offers in Australia only to the extent that such offers of Shares for issue or sale do not need disclosure to investors under Part 6D.2 of the Australian Corporations Act. Any offer of Shares received in Australia is void to the extent that it needs disclosure to investors under the Australian Corporations Act. In particular, offers for the issue or sale of Shares will only be made in Australia in reliance on various exemptions from such disclosure to investors provided by section 708 of the Australian Corporations Act. Any person to whom Shares are issued or sold pursuant to an exemption provided by section 708 of the Australian Corporations Act must not, within 12 months after the issue, offer those Shares for sale in Australia unless that offer is itself made in reliance on an exemption from disclosure provided by that section. 14.3 Canada The Shares have not been and will not be qualified by a prospectus in accordance with the prospectus requirements under applicable securities law in any Canadian jurisdiction and therefore may not be offered or sold, directly or indirectly, in Canada except in compliance with applicable

242 Canadian securities laws. Accordingly, no sales of Shares will be made in Canada except in the provinces of Ontario, Quebec and British Columbia: (i) through an appropriately registered securities dealer or in accordance with an available exemption from the registration requirements of applicable Canadian securities laws; and (ii) pursuant to an exemption from the prospectus requirements of such laws. 14.4 Japan The Shares have not been and will not be registered under the Securities and Exchange Law of Japan (Law No. 25 of 1948 as amend) (the ‘‘Securities and Exchange Law’’), and may not be offered or sold, directly or indirectly, in Japan or to a resident of Japan except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Securities and Exchange Law and other relevant laws and regulations of Japan. 14.5 European Economic Area In relation to each member state of the European Economic Area which has implemented the Prospectus Directive (each a ‘‘Relevant Member State’’), with effect from and including the date on which the Prospectus Directive is implemented in that relevant member state (the ‘‘relevant implementation date’’), an offer to the public of any Shares which are the subject of the Global Offer contemplated by this document may not be made by the Relevant Member State except that an offer to the public in that Relevant Member State of any Shares may be made at any time under the following exemptions under the Prospectus Directive, if they have been implemented in that Relevant Member State: (a) to legal entities which are authorised or regulated to operate in the financial markets or, if not so authorised or regulated, whose corporate purpose is solely to invest in securities; (b) to any legal entity which has two or more of: (i) an average of at least 250 employees during the last financial year; (ii) a total balance sheet of more than A43,000,000; and (iii) an annual turnover of more than A50,000,000, as shown in its last annual consolidated accounts; (c) by the Underwriters to fewer than 100 natural or legal persons (other than ‘‘qualified investors’’ as defined in the Prospectus Directive) subject to obtaining the prior written consent of the Joint Global Co-ordinators for any such offer; or (d) in any other circumstances which do not require the publication by the Company of a prospectus pursuant to Article 3(2) of the Prospectus Directive, provided that no such offer of Shares shall result in a requirement for the publication of a prospectus by the Company pursuant to Article 3 of the Prospective Directive or any measure implementing the Prospectus Directive in a Relevant Member State and each person who initially acquires any Shares or to whom any offer is made under the Global Offer will be deemed to have represented, acknowledged and agreed that it is a ‘‘qualified investor’’ within the meaning of Article 2(1)(e) of the Prospectus Directive. For the purposes of this provision, the expression an ‘‘offer of Shares to the public’’ in relation to any Shares in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and any Shares to be offered so as to enable an investor to decide to purchase any Shares, as the same may be varied in that Relevant Member State by any measure implementing the Prospectus Directive in that Relevant Member State and the expression ‘‘Prospectus Directive’’ means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State. 14.6 United Kingdom No Shares have been offered or sold or will be offered or sold to persons in the UK prior to Admission except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which will not result in an offer to the public in the UK within the meaning of Section 102B of FSMA. 14.7 General No action has been or will be taken in any jurisdiction, other than the UK, that would permit a public offering of the Shares, or possession or distribution of this document or any other offering

243 material, in any country or jurisdiction where action for that purpose is required. Accordingly, the Shares may not be offered or sold, directly or indirectly, and neither this document nor any other offering material or advertisement in connection with the Shares may be distributed or published in or from any country or jurisdiction except under circumstances that will result in compliance with any applicable rules and regulations of any such country or jurisdiction.

15. WORKING CAPITAL The Company is of the opinion that, taking into account the bank facilities available and the net proceeds of the Global Offer receivable by the Company, the Group has sufficient working capital for its present requirements, that is, for at least the 12 months following the date of publication of this document.

16. SIGNIFICANT CHANGE Two subsidiaries of Xchanging B.V. respectively acquired BAE Systems’ shares in the human resources and procurement EPs. BAE Systems’ 50% holding in XHRS was acquired on 16 January 2007 for £10 million and the 50% holding in XPS was acquired on 6 March 2007 for £47 million (£44 million net cash price). On 1 March 2007, a subsidiary of Xchanging B.V. entered into a credit agreement with Lloyds TSB Bank plc for facilities in a maximum aggregate amount of £35 million. Further information on these agreements can be found in paragraph 18 of this Part 8: Additional Information and, in the case of the acquisitions in note 40 to Section A of Part 5: Accountants’ Reports and Financial Information. On 23 April 2007, Xchanging plc acquired the entire issued share capital of Xchanging Holdings Limited (being 1 ordinary share of £1) for £1. Save as set out above, there has been no significant change in the financial and trading position of the Group and Xchanging plc since 31 December 2006, the date to which the IFRS financial information in respect of the Group and Xchanging plc in Section A and Section C respectively of Part 5: Accountants’ Reports and Financial Information has been prepared.

17. LITIGATION 17.1 Neither the Company nor any member of the Group is or has been involved in any governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the Company is aware) during the 12 months preceding the date of this document which may have, or have had a significant effect on the financial position or profitability of the Group. 17.2 In April 2003, the OFT received a complaint from Eurobase, a supplier and developer of software for the insurance industry that Xchanging was abusing its dominant position in the supply of back office services to Lloyd’s and the London Insurance market in order to promote its own insurance software. The OFT investigated the complaint in the light of Chapter II of the Competition Act 1998 and considered two issues namely whether certain members of the Group held a dominant position in the supply of back office services and whether any of them was abusing its position to sell its own software product. The OFT concluded its investigation and considered it unlikely that the market would be as narrow as the provision of the back office services to participants in Lloyd’s and the London Insurance market and that it was unlikely that any of such members of the Group held a dominant position. Moreover, the evidence suggested that insurance companies at all times are free to choose both their supplier of back office services (including continuing to provide it in-house) and to choose their software supplier. The OFT concluded that it had seen no evidence to suggest that any of such members of the Group were acting in a way that would adversely affect competition. It closed the case on 10 June 2003.

18. MATERIAL CONTRACTS The following contracts (not being contracts entered into in the ordinary course of business) have been entered into by a member of the Group within the two years immediately preceding the date of this document and are, or may be, material or have been entered into at any time by any member

244 of the Group and contain provisions under which any member of the Group has an obligation or entitlement which is, or may be, material to the Group as at the date of this document: 18.1 Lloyd’s Share Purchase Agreements for the entire issued share capital of LPSO Limited, LCO Marine and LCO Non-Marine Limited On 30 April 2001, a sale and purchase agreement was entered into between Lloyd’s, as seller, and Ins-sure Holdings (an unlimited company), as buyer. Pursuant to this agreement, Ins-sure Holdings acquired the entire issued share capital of LPSO Limited in consideration for the issue and allotment to Lloyd’s of 2,000 shares of £0.001 each, designated as B shares in the capital of Ins-sure Holdings and credited as fully paid. On 31 October 2001, two sale and purchase agreements were entered into between Lloyd’s, as seller, and Xchanging Claims Services Limited, as buyer, on substantially the same terms. Pursuant to the first agreement, Xchanging Claims Services Limited acquired the entire issued share capital of LCO Marine Limited in consideration for the issue and allotment to Lloyd’s of 2 shares of £1 each, designated as A shares in the capital of Xchanging Claims Services Limited and credited as fully paid. Pursuant to the second agreement, Xchanging Claims Services Limited acquired the entire issued share capital of LCO Non-Marine and Aviation Limited in consideration for the issue and allotment to Lloyd’s of 2 shares of £1 each, designated as A shares in the capital of Xchanging Claims Services Limited and credited as fully paid. For details of relevant surviving pensions arrangements in connection with these agreements (referred to in such paragraphs as the Participation Arrangements) in relation to LPSO Limited, LCO Marine Limited and LCO Non-Marine and Aviation Limited, see paragraph 11.1.3 of this Part 8: Additional Information. 18.2 BAE Warrant On 8 June 2004, Xchanging B.V. and BAE Systems entered into a second deed of amendment to the BAE Systems warrant originally dated 19 April 2001 (as subsequently amended by a first deed of amendment dated 25 October 2001) (the ‘‘BAE Warrant’’). Under the terms of the BAE Warrant, BAE Systems has the right to subscribe for Common Shares (for the purposes of this paragraph the ‘‘BAE Exercise Right’’). Under the terms of the Takeover Offer Agreement described at paragraph 18.9 of this Part 8: Additional Information, BAE Systems has agreed to exercise in whole the BAE Exercise Right prior to Admission. Immediately following the exercise of the BAE Exercise Right, Xchanging B.V. shall issue 772,019 Common Shares to BAE Systems for a cash consideration of £443,712 and US$2,212,301 in satisfaction of its obligations under the BAE Warrant. 18.3 CAD IT—8 sale and purchase agreements for shares amounting to 10% of the entire issued share capital of CAD IT Xchanging UK Limited (then known as Xchanging Limited) entered into 8 sale and purchase agreements with 8 individual shareholders of CAD IT SpA (for the purposes of this paragraph ‘‘CAD IT’’) to acquire 10% of the entire issued share capital in CAD IT (898,000 ordinary shares for total consideration of A9,608,600 at A10.7 per share). The agreements are stated to have been made on 18 November 2005 although transfers and final execution by all selling shareholders took place on 21 November 2005. The agreements are governed under Italian law, subject to the exclusive jurisdiction of the Courts of Verona. No representations or warranties are given by any of the parties and each of the parties bear their own costs. The agreements are made on substantially the same terms with the exception of additional undertakings by Giuseppe Dal Cortivo not to sell any of his shares in CAD IT to other parties. 18.4 Share Sale Agreement for the entire issued share capital of Landmark Business Consulting Limited On 9 December 2005, a share sale agreement was entered into between XIPS, as buyer, and George Bell, Giles Edward Lightfoot, Graham Granville Whitehead and Timothy Madeley Yorke as the sellers (for the purposes of this paragraph the ‘‘Sellers’’). Pursuant to this agreement, XIPS acquired the entire issued share capital of Landmark in consideration for £7,500,000 in non-qualifying corporate bonds of which £4,500,000 (for the purposes of this paragraph the ‘‘Additional Consideration’’) is still payable in tranches up to 15 March 2009 (subject to post

245 completion adjustments). Payment of the Additional Consideration is based on certain performance criteria. The Sellers have provided warranties as to, inter alia, their title to the shares and their power and authority to enter into the agreement. In addition, the Sellers have also given warranties as to the status of the accounts, and certain tax, trading, litigation, employment, pensions and insurance matters. The aggregate liability of the Sellers in respect of any claim under the warranties and/or the deed of indemnity dated 5 January 2006 between all parties (for the purpose of this paragraph the ‘‘Deed of Indemnity’’) is £3,000,000 subject to a de minimis threshold of £50,000. The Deed of Indemnity is valid for six years until 5 January 2012. XIPS has provided warranties as to power and authority to enter into the agreement. XIPS has also warranted that, for at least three years from completion, Landmark shall preserve all material records and allow the Sellers access to these. XIPS has warranted that it will not enter into or become party to any agreement or arrangement which will have the effect of placing any person above the non-qualifying corporate bonds (the consideration) in preference of payment or in exercise of security. XIPS also warrants that it will retain all earnings before interest and taxation (for the purposes of this paragraph ‘‘EBIT’’) and working capital generated from EBIT within its business until such time as the Additional Consideration becomes payable. The agreement also contains restrictive covenants preventing the Sellers from soliciting customers or employees, interfering with the continuance of supplies to Landmark, engaging in a similar business for a period of two years from completion or six months from the date a relevant Seller ceased to be employed by XIPS (whichever is the later). 18.5 Share Sale Agreement for the entire issued share capital of Ferguson, Snell & Associates Limited On 30 June 2006, a share sale agreement was entered into between HR Holdco Limited as buyer, Xchanging B.V. as guarantor and Paul Ferguson and John Snell as the sellers (for the purposes of this paragraph the ‘‘Sellers’’). Pursuant to this agreement, HR Holdco Limited acquired the entire issued share capital of Ferguson Snell. The consideration for the shares was an initial price of £3,275,000 paid on completion; further consideration of up to £2,150,000 to be paid upon the achievement of certain performance criteria. In consideration of the Sellers entering into the agreement, Xchanging B.V. has guaranteed the due and punctual performance and observance by HR Holdco Limited of all its obligations under the share sale agreement and any document referred to in it (including the tax covenant between the parties, save for Xchanging B.V., dated 30 June 2006 (for the purposes of this paragraph the ‘‘Tax Covenant’’)). Xchanging B.V. indemnifies the Sellers against all losses, claims, costs and expenses suffered if HR Holdco Limited fails to discharge its liabilities and obligations. The guarantee remains in force until all obligations of HR Holdco Limited are performed or satisfied. No time given to HR Holdco Limited or variation of this agreement will modify or release the obligations of Xchanging B.V. as guarantor. The Sellers have provided warranties as to, inter alia, their title to their shares and their authority and capacity to enter into the agreement and the Tax Covenant. In addition, the sellers have also given warranties as to solvency, status of the accounts, and certain tax, trading, litigation, property, employment, pension, insurance and IP matters. HR Holdco Limited and Xchanging B.V. have provided warranties in relation to solvency and their authority and capacity to enter into the agreement and the Tax Covenant. The aggregate liability of the Sellers in respect of all claims under the warranties or the Tax Covenant (claims under the Tax Covenant will be unenforceable after 30 June 2013) is limited to the total price received by the Sellers as at the date on which relevant claims are settled or final judgment given in favour of HR Holdco Limited. This is subject to de minimis thresholds. The aggregate liability of HR Holdco Limited and Xchanging B.V. under the warranties is limited to £750,000 each. HR Holdco Limited undertook to the Sellers that, subject to the prior consent of the Sellers, from completion until 31 March 2007 it would ensure that the business of Ferguson Snell is carried out in the ordinary course. HR Holdco Limited also agreed to implement and maintain a retention bonus arrangement for employees in addition to the usual bonus scheme of Ferguson Snell. The Sellers are also subject to undertakings that they will not solicit customers or employees or engage in a

246 similar business anywhere until after 30 June 2009 (without the prior written consent of HR Holdco Limited). 18.6 Share Sale Agreement for the entire issued share capital of HR Enterprise Limited On 16 January 2007, a share sale and purchase agreement was entered into between HR Holdco Limited as purchaser (for the purposes of this paragraph the ‘‘Buyer’’) and BAE Systems as seller (for the purposes of this paragraph the ‘‘Seller’’) (and collectively, for the purposes of this paragraph, the ‘‘Parties’’) for HR Enterprise Limited. Prior to the Parties entering into the agreement, the Parties jointly owned HR Enterprise Limited in equal portions and it was part of a joint venture business between them. Under the agreement, the Buyer acquired the issued share capital held by the Seller in the HR Enterprise, making the Buyer the owner of the entire issued share capital of HR Enterprise Limited. The consideration for the shares was £10,114,327 (which includes some interest that was payable on the base purchase price) and this amount was paid in full on the date of completion. The Seller has provided warranties, inter alia, as to its unencumbered title to the shares and having capacity to enter into the agreement. Certain categories of loss are excluded from recovery against the Seller under the agreement, including, inter alia, loss of revenue, opportunity, indirect or consequential loss and the maximum liability of the Seller under the agreement in respect of the shares is £10,114,327. However the restrictive covenant not to compete against HR Enterprise Limited (set out below) is neither subject to any cap nor exclusion of any category of loss. The agreement contains a restrictive covenant which applies within the United Kingdom and Ireland (for the purposes of this paragraph the ‘‘Territory’’) and relates to the services which were supplied by HR Enterprise Limited to the Seller at the date of completion (with some limited exceptions) (for the purposes of this paragraph the ‘‘Restricted Services’’). The restrictive covenant prevents the Seller or any subsidiary controlled by it and incorporated in the Territory from bidding or entering into contracts under which it will supply services substantially the same as, or acquiring control of a company whose principal activity is the supply of, Restricted Services, in each case within the Territory for a period of three years following completion. The restrictive covenant contains various exceptions which, inter alia, cover the Seller supplying Restricted Services where this is incidental to a larger supply of services, acquiring and controlling a company which was supplying Restricted Services prior to becoming so controlled by the Seller, or where the principal purpose of such acquisition is not to carry out contracts for Restricted Services. In each of these cases, the acquired company may then continue supplying the Restricted Services. For details of the relevant pensions arrangements in connection with the acquisition of HR Enterprise Limited from BAE Systems, see paragraph 11.1.4 of this Part 8: Additional Information. 18.7 Lloyds Facility Xchanging UK Limited (the ‘‘Company’’) entered into a credit agreement dated on or about 1 March 2007 with, inter alia, Lloyds TSB Bank plc (the ‘‘Agent’’) as mandated lead arranger (the ‘‘Facility Agreement’’). The Facility Agreement provides for facilities in a maximum aggregate principal amount of £35 million (the ‘‘Facilities’’), consisting of a £25 million multi-currency term loan facility known as the ‘‘Term Loan Facility’’ and a £10 million multi-currency revolving credit facility known as the ‘‘Revolving Facility’’. The Term Loan Facility may, inter alia, be used to fund the acquisition (the ‘‘Acquisition’’) of shares in Xchanging Procurement Services (Holdco) Limited and HR Enterprise Limited (together, the ‘‘Targets’’), to pay costs incurred in connection with the Acquisition to refinance certain indebtedness of the Company. The Revolving Facility is capable of being utilised as cash drawings and ancillary facilities for the general corporate purposes of Xchanging B.V and its subsidiaries (the ‘‘Group’’). Utilisations under the Facility Agreement will bear interest for each interest period at a rate per annum equal to LIBOR (or, in the case of drawings in Euro, EURIBOR) plus a margin and any mandatory costs. The margin is subject to a margin ‘‘ratchet’’ based on leverage. The applicable margin leverage grid changes when the Company completes a Qualifying Listing. A ‘‘Qualifying Listing’’ is a listing of Xchanging plc on the London Stock Exchange plc on or before 31 December 2007 and which satisfies a number of other criteria.

247 Prior to a Qualifying Listing, pursuant to the ratchet, the margin will be adjusted at specified increments, if the Group (on a consolidated basis) attains certain ratios of total borrowings to EBITDA, from a maximum of 2.75% per annum to a minimum of 1.25% per annum. Following a Qualifying Listing, the margin will be adjusted on the same basis from a maximum of 1.75% per annum to a minimum of 1.25% per annum. A commitment fee is payable on the undrawn portion of the Facilities at the rate of 35% of the applicable margin per annum. Customary upfront fees payable to the Agent for making the Facility Agreement available are also payable. Certain members of the Group are parties to the Facility Agreement as guarantors. In addition, material members of the Group (being those contributing 5% or more of the consolidated EBITDA and 5% or more of the gross turnover of the Group) are required to accede to the Facility Agreement as guarantors. The Targets and their subsidiaries are also required to accede to the Facility Agreement as guarantors on or before 30 June 2007. This was achieved on 20 March 2007. Each guarantor (other than Xchanging B.V.) has granted fixed and floating charge security over its assets. Xchanging B.V. has granted a share charge over the shares it owns in other members of the Group. Each guarantor is entitled to have this security released following a Qualifying Listing. The Facility Agreement requires members of the Group to observe certain undertakings including, but not limited to, undertakings relating to delivery of financial statements, details of material litigation, insurances, authorisations being obtained and maintained, compliance with laws, payment of taxes, hedging and pari passu ranking. The Facility Agreement requires members of the Group to comply with certain negative covenants including, but not limited to, covenants relating to creation of security, financial indebtedness, guarantees, disposals, loans and credit, acquisitions and joint ventures, and change in business. There are exemptions and carve-outs from these. In addition, the Facility Agreement requires the Group to comply with specified financial ratios in relation to interest cover, leverage and minimum net worth. Certain provisions of the Facility Agreement are deemed not to apply following a Qualifying Listing. The Term Loan Facility is to be partially repaid in the amount of £5 million on 31 December 2009, with the balance of the loan to be repaid on 30 June 2010. Each Loan under the Revolving Facility shall be repaid on the last day of its Interest Period, with the Revolving Facility being repaid and cancelled in full on the earlier of 30 June 2011 and the date on which all of the Facilities are cancelled in full. The Facilities are required to be prepaid in full immediately upon the occurrence of certain events including a Change of Control (as defined therein). The Facilities may only be prepaid in integral multiples of £500,000. Any prepayment under the Facility Agreement shall be made together with accrued interest on the amount prepaid and, subject to any break costs, without premium or penalty. The Facility Agreement contains certain events of default including, but not limited to, events relating to failure to pay, misrepresentation, cross-default, breach of certain undertakings, breach of financial covenants, insolvency and insolvency proceedings, material adverse change, cessation of business, unlawfulness and invalidity, repudiation, litigation and change of ownership of obligors. 18.8 Share Sale Agreement for the entire issued share capital of Xchanging Procurement Services (Holdco) Limited On 6 March 2007, a share sale agreement was entered into between XUK Holdco (No. 2) Limited as purchaser (for the purposes of this paragraph the ‘‘Buyer’’), BAE Systems as seller (for the purposes of this paragraph the ‘‘Seller’’) and Xchanging B.V. as guarantor (together, the ‘‘Parties’’) in respect of Xchanging Procurement Services (Holdco) Limited (for the purposes of this paragraph ‘‘XPS’’). Prior to entering into this agreement, the Buyer and Seller jointly owned XPS in equal portions and it was part of a joint venture business between them. Under this agreement, the Buyer acquired the issued share capital held by the Seller in XPS, making the Buyer the owner of the entire issued share capital of XPS. The consideration for the shares is payable no later than 2 July

248 2007 and includes an element of interest to be calculated from an effective date of 1 January 2007 up to the date of payment. The Seller has provided warranties, inter alia, as to its unencumbered title to the shares and capacity to enter into the agreement. Certain categories of loss are excluded from recovery against the Seller under the agreement, including, inter alia, loss of revenue, opportunity, indirect or consequential loss. The maximum liability of the Seller under the agreement in respect of the shares is the total consideration paid by the Buyer. However, the restrictive covenant not to compete against XPS (referred to below) is neither subject to any cap nor exclusion of any category of loss. The agreement contains a restrictive covenant which applies across various countries in Europe (the ‘‘Territory’’) and relates to the services which were supplied by XPS to the Seller at the date of completion (with some limited exceptions) (the ‘‘Restricted Services’’). The restrictive covenant prevents the Seller or any subsidiary incorporated in England and Wales from bidding or entering into contracts under which it will supply services substantially the same as, or acquiring control of a company whose principal activity is the supply of, Restricted Services, in each case within the Territory. The restrictive covenant contains various exceptions which, inter alia, cover the Seller supplying Restricted Services where this is incidental to a larger supply of services, acquiring and controlling a company which was supplying Restricted Services prior to becoming so controlled by the Seller, or where the principal purpose of such acquisition is not to carry out contracts for Restricted Services. In each of these cases, the acquired company may then continue supplying the Restricted Services. The Parties have also entered into a deed of guarantee, pursuant to which Xchanging B.V. has agreed to guarantee to the Seller the due and punctual performance by the Buyer of all its obligations, warranties, duties and undertakings under the share sale agreement. Xchanging B.V. has also agreed to indemnify the Seller against any losses which the Seller incurs by reason of any breach of the Buyer of its obligations, warranties, duties and undertakings under the agreement. The guarantee remains in force until all obligations of the Buyer are performed or satisfied in full. No time given by the Seller, variation of the agreement or legal limitation or insolvency of the Buyer will release the obligations of Xchanging B.V. under the guarantee. For details of the relevant pensions arrangement in connection with the acquisition of XPS from BAE Systems, see paragraph 11.1.4 of this Part 8: Additional Information. 18.9 Takeover Offer Agreement 18.9.1 The Takeover Offer Agreement was executed on 31 July 2006 between, inter alia, the Company, Xchanging B.V., General Atlantic, Sal. Oppenheim, David Andrews, BAE Systems and 52nd Street Associates and sets out the terms on which the shareholders of Xchanging B.V. will exchange their shares in Xchanging B.V. for shares in the Company on Admission becoming effective. 18.9.2 The Takeover Offer Agreement is conditional on the following conditions having been satisfied or waived on or before 30 June 2007: (a) Admission becoming effective; (b) the valid acceptance of the takeover by holders of 100% by nominal value of the fully diluted share capital of Xchanging B.V. as at completion, or such lower percentage as each of an authorised representative of General Atlantic and David Andrews may agree (in their joint absolute discretion) in writing: (c) the receipt from the relevant tax authorities of tax clearances for UK tax resident shareholders in relation to the offer under Section 707 of the Income and Corporation Taxes Act 1988 and Section 138 of the Taxation and Chargeable Gains Act 1992; (d) the notice of control (in accordance with Part XII of FSMA) being given to the FSA and the FSA approving (without imposing any conditions or requirements which were not approved by David Andrews or General Atlantic) the Company as a controller of Xchanging Insurance Professional Services Limited either in writing or in accordance with Section 184(2) of FSMA;

249 (e) all necessary competition notifications and filings having been made and: (i) the expiry, lapsing or termination of all applicable waiting and other time periods (including extensions thereof) under any applicable legislation or regulation of any applicable jurisdiction; (ii) each necessary statutory and regulatory obligation in connection with the offer having been complied with; and (iii) all necessary regulatory consents, approvals or clearances from the competent authorities of any such jurisdictions having been obtained; (f) the BaFin being notified under section 2c of the German Banking Act (‘‘Kreditwesengesetz’’, ‘‘KWG’’) and the BaFin approving (without imposing any conditions or requirements which are not approved by David Andrews and General Atlantic) the Company as a controller of Xtb either in writing or by not objecting within three months from receipt of the complete notification as provided in section 2c paragraph 1a of the KWG; (g) the delivery to the Company of written consents (in terms satisfactory to an authorised representative of General Atlantic and David Andrews) in relation to the contracts set out in Schedule 10 of the Takeover Offer Agreement; and (h) the Takeover Offer Agreement not having been terminated in accordance with its terms by either of General Atlantic or the Board of Directors or unanimously by all of the shareholders of Xchanging B.V.. 18.9.3 The Takeover Offer Agreement contains the following principal provisions: (a) the shareholders of Xchanging B.V. agreed to waive their past and present rights under the Dutch Civil Code, the articles of association of Xchanging B.V., the ninth amended and restated stockholders’ agreement and any other relevant shareholder documentation on both the share for share exchange and on Admission. Consent was given by the shareholders of Xchanging B.V. to the share for share exchange and any roll-over of options pursuant to it; (b) an agreement to convert the full outstanding amount owed under the Rebus Loan by Xchanging B.V. to General Atlantic Partners (Bermuda), L.P. and GAP Coinvestment Partners II, L.P. for shares in Xchanging B.V. on the day of but prior to Admission. These Xchanging B.V. shares were then included in the share for share exchange; (c) BAE Systems agreed to exercise its right to subscribe for Common Shares under the BAE Warrant in whole on the day of but prior to Admission. A description of the BAE Warrant is set out in paragraph 18.2 of this Part 8: Additional Information; and (d) the shareholders of Xchanging B.V. agreed that principal shareholder documentation of Xchanging B.V. (excluding the current articles of association of Xchanging B.V. but including stockholders agreements, subscription agreements, note or loan commitment agreements, warrant instruments and the latest registration rights agreement) shall terminate upon the date of Admission becoming effective and no party thereto shall have any claims against any other. 18.9.4 The shareholders of Xchanging B.V. gave customary warranties to the Company as to title, authority and capacity. The Company and Xchanging B.V. gave certain warranties to the shareholders of Xchanging B.V. as to title, authority, capacity, litigation, insolvency, default and the Company alone as to operating history up to the date of Admission. 18.10 Employee Offer Letters Employee Offer Letters (being agreements from 31 July 2006 to 17 April 2007) have been executed between Xchanging B.V. and the Company with all employees (and other shareholders of Xchanging B.V. who hold shares in Xchanging B.V.). Under the Employee Offer Letters, the arrangement comprised in the Takeover Offer Agreement has been extended to, and accepted by, all other shareholders of Xchanging B.V. who are not otherwise party to the Takeover Offer Agreement and on the same basis as set out in the Takeover Offer Agreement. The Employee Offer Letters set out the terms on which the remaining shareholders of Xchanging B.V. will exchange

250 their shares in Xchanging B.V. for Shares on Admission becoming effective (including shares in Xchanging B.V. acquired as a result of the exercise of any options under the normal rules of the Approved Share Option Plan, the Unapproved G Share Option Plan or the Unapproved Share Option Plan). 18.11 Option Rollover Letters Option Rollover Letters from Xchanging B.V. and the Company were issued to all employees holding options in Xchanging B.V. under the normal rules of the Approved Share Option Plan, the Unapproved G Share Option Plan or the Unapproved Share Option Plan. The Option Rollover Letters set out the terms under which the optionholders may roll over any remaining unexercised options in Xchanging B.V. into new options of equivalent value in the Company. For optionholders who do not accept the terms of the Option Rollover Letters, any options in Xchanging B.V. which are not rolled over under the Option Rollover Letters will cease to be capable of exercise and will have no value under the rules of the Approved Share Option Plan, the Unapproved G Share Option Plan or the Unapproved Share Option Plan. 18.12 Underwriting Agreement For information on the Underwriting Agreement, see paragraph 7 of Part 3: The Global Offer. 18.13 Relationship Deed On 24 April 2007, General Atlantic entered into the Relationship Deed with the Company governing the exercise by General Atlantic of its rights in respect of the Company following Admission for the purposes of the Prospectus Rules, Listing Rules and the Disclosure Rules. The Relationship Deed takes effect upon Admission. General Atlantic has undertaken to exercise its voting powers in relation to the Company to ensure that the Company is capable of carrying on its business for the benefit of shareholders of the Company as a whole and independently of General Atlantic and has further agreed not to exercise its voting rights in favour of any amendment to the memorandum and articles of association of the Company in a manner which would be contrary with the principle of independence of the Company. For a period of two years from Admission, General Atlantic has undertaken, to use all reasonable endeavours to ensure that it shall not, and to the extent it is legally able to do so, procure that its affiliates (subject to limited exceptions) shall not, deal in, acquire or dispose or agree to acquire or dispose of, directly or indirectly, any Shares without giving prior written notice to the Company and that it shall use its reasonable endeavours to ensure that any such dealings shall be conducted in a manner designed to ensure an orderly market in the Shares. General Atlantic has agreed that it shall not, and to the extent it is legally able to do so, shall procure that none of its affiliates (subject to limited exceptions) shall, solicit for employment any key employee (being any member of the management board, executive committee or any Senior Manager (or their replacements)) for a period of two years from Admission. For so long as General Atlantic and its affiliates together hold at least 20% of the Shares in issue, General Atlantic shall be entitled to appoint (and remove and reappoint) two non-executive directors to the Board (the ‘‘General Atlantic Directors’’). In the event that General Atlantic and its affiliates together cease to hold 20% of the Shares in issue but continue to hold at least 10% of the Shares, General Atlantic shall be entitled to appoint (and remove and reappoint) one non-executive director to the Board. Immediately following Admission, the General Atlantic Directors will be David Hodgson and Tom Tinsley. General Atlantic shall cease to be entitled to appoint two General Atlantic Directors if General Atlantic and its affiliates together cease to hold at least 20% of the Shares in issue and shall cease to be entitled to appoint any General Atlantic Directors if General Atlantic and its affiliates together cease to hold at least 10% of the Shares in issue. Additionally, if a General Atlantic Director becomes a director of a company that is involved in a competing business to the Company as determined by a majority of independent directors acting reasonably, then the Company may require General Atlantic to appoint a replacement. Where a General Atlantic Director receives information in a capacity other than as a director of the Company, which imposes on him a duty of confidentiality, he shall not be obliged to disclose that

251 information to the Company. These obligations will be reflected in the terms of the letter of appointment of any General Atlantic Director. All transactions and relationships between any member of the Group and General Atlantic or any of its associates shall be conducted at arm’s length, on a normal commercial basis and, if applicable, in accordance with the related party transaction rules set out in Chapter 11 of the Listing Rules. Only independent directors shall be entitled to vote on any matter giving rise to a conflict of interest between a Group Company and General Atlantic. Any material amendment to any arrangement or agreement with General Atlantic must be agreed by a majority of independent directors. General Atlantic shall, until such a time as it ceases to have the right to appoint a General Atlantic Director to the Board and subject to the Company’s obligations under all applicable laws (including, without limitation, the Listing Rules and the Disclosure Rules), be provided with all such information as it reasonably requests to complete any tax return, compilation or filing which it is required by law or regulation to make. General Atlantic shall be entitled to disclose any such information received to its affiliates for internal purposes (subject to limited exceptions). General Atlantic shall otherwise (and shall procure that any affiliate to whom any information is passed shall) keep confidential any information relating to any member of the Group that is provided. The Relationship Deed will terminate, and General Atlantic will no longer have the right to appoint General Atlantic Director(s), if General Atlantic and its affiliates collectively cease to hold Shares carrying not less than 10% of the Shares in issue or upon the delisting of the Company or the occurrence of certain insolvency events. 18.14 Registration Rights Agreement

18.14.1 Xchanging plc Registration Rights Agreement On 24 April 2007, a registration rights agreement was entered into between the Company, General Atlantic, Sal. Oppenheim, 52nd Street Associates and David Andrews (for the purposes of this paragraph the ‘‘PLC Registration Rights Agreement’’). At any time after an initial public offering of the Company pursuant to a registration statement filed under the Securities Act, each of General Atlantic and David Andrews have the right to require the Company to register their securities under the Securities Act for up to two registrations (for the purposes of this paragraph each registration a ‘‘Demand Registration’’) at the expense of the Company. Any of General Atlantic, David Andrews, Sal. Oppenheim , 52nd Street Associates and permitted transferees are entitled to request the inclusion of their securities in such Demand Registrations (for the purposes of this paragraph ‘‘Piggyback Registration Rights’’) at the expense of the Company. The Company is not required to give effect to any Piggyback Registration Rights if an application is not made within 10 days of receipt, by the holders of Piggyback Registration Rights, of written notice from the Company of any Demand Registrations. The Company shall use reasonable efforts to cause any Demand Registrations to become and remain effective not later than 90 days after it receives a request to register securities. The Company, or the initiating holders of a majority of registerable securities, may elect that a Demand Registration be in the form of a firm commitment underwritten offering. At any time after an initial public offering of registerable securities of the Company under the Securities Act, if the Company proposes to file a registration statement with respect to an offering for its own account then the Company must give notice to General Atlantic, David Andrews, Sal. Oppenheim, 52nd Street Associates and permitted transferees at least 30 days before the anticipated filing date. Such holders have 10 days from receipt of such notice in which to request inclusion of their securities in any registration statement at the expense of the Company. General Atlantic or David Andrews are entitled to request that, if Xchanging B.V. becomes eligible to use Form F-3, the Company registers securities on Form F-3 in connection with a public offering of its securities. The Company shall give written notice of such request to all other holders of registrable securities at least 30 days before the anticipated filing date of such form Form-F3 and all such holders have the right to request piggyback registration of their securities within 15 days of receipt of such notice and at the expense of the Company.

252 The Company shall use reasonable efforts to cause such registration to become and remain effective not later than 90 days after it receives a request to register securities. The Company, or the initiating holders of registrable securities, may elect that the registration be in the form of a firm commitment underwritten offering. If at the time of any request to register a Form-F3 registration, the Company is engaged in, or has plans to engage within 90 days in, a registered public offering or other activity which the management board determines in good faith would be adversely affected by Form F-3 registration then the Company may direct that such request be delayed for no more than 3 months from the effective date of such offering or completion of such activity. In the event that the Company were to commence an initial registered public offering under the Securities Act, the Company expects that such an offering would include all of its outstanding shares.

19. SELLING SHAREHOLDERS 19.1 The following table sets out the number of Shares that will be sold by each Selling Shareholder as part of the Global Offer: Number of Shares to be Number of sold (assuming Shares to be no exercise of sold (if the the Over- Over-allotment allotment Option is Shareholder Option) exercised in full) General Atlantic Partners 55, L.P...... 3,005,824 4,005,693 GAP-Xchange Partners, L.L.C, SCA...... 7,658,172 10,205,615 GAP Coinvestment Partners, L.P...... 1,602,259 2,135,241 GAP Coinvestment Partners II, L.P...... 3,583,444 4,775,455 General Atlantic Partners (Bermuda), L.P...... 18,249,345 24,319,872 GAPstar, LLC ...... 1,770,138 2,358,965 GAPCo GMBH & Co. KG...... 23,225 30,952 GAP-W International, L.P...... 2,070,214 2,758,859 Sal. Oppenheim jr. & Cie. KGaA...... 2,419,453 2,419,453 BAE Systems PLC...... 3,088,076 3,088,076 52nd Street Associates ...... 455,000 455,000 John Robins...... 120,000 120,000 David Andrews ...... 5,600,000 5,600,000 Dennis Millard...... 100,000 100,000 Johannes Maret ...... 355,972 355,972 Clive Buesnel ...... 160,008 160,008 David Rich-Jones...... 144,000 144,000 Gary Whitaker ...... 100,000 100,000 Xchanging B.V. 2007 Employee Benefit Trust(1) ...... 2,431,744 2,431,744 TOTAL...... 52,936,874 65,564,905

(1) On 24 April 2007, the following people sold shares in Xchanging B.V. to the Xchanging B.V. 2007 Employee Benefit Trust (‘‘2007 EBT’’) for a price equal to the Offer Price attributable to the Shares issued as consideration pursuant to the Acquisition, less any deductions payable by the 2007 EBT as a Selling Shareholder under the Underwriting Agreement: Adele Browne, 2,666 G Shares (equivalent to 599,892 Shares); Richard Houghton, 3,333 G Shares (equivalent to 749,976 Shares); Clive Buesnel, 1,111 G Shares (equivalent to 249,992 Shares); David Rich-Jones 1,111 G Shares and 62,500 Scheme A Shares (equivalent to 499,992 Shares); Stephen Bowen, 1,155 G Shares (equivalent to 259,892 Shares); and John Bramley 18,000 Scheme A Shares (equivalent to 72,000 Shares). The business address of each of General Atlantic Partners 55, L.P.; GAP-Xchange Partners, L.L.C, SCA; GAP Coinvestment Partners, L.P.; GAP Coinvestment Partners II, L.P.; General Atlantic Partners (Bermuda), L.P.; GapStar, LLC; GAPCo GMBH & Co. KG and GAP-W International, L.P. is 3 Pickwick Plaza, Greenwich, Connecticut 06830, United States. The business address of Sal. Oppenheim jr. & Cie. KGaA is Unter Sachsenhausen 4, 50667 Koln,¨ Germany. The business address of BAE Systems PLC is 6 Carlton Gardens, London, SW1Y 5AD, United Kingdom. The business address of 52nd Street Associates is 55 East 52nd Street, 27th Floor, New York, NY 10055, United States. The business address of Xchanging B.V. 2007 Employee Benefit Trust is Whiteley Chambers, Don Street, St Helier, Jersey JE4 9W6. The business address of the remaining Selling Shareholders is 13 Hanover Square, London, W1S 1HN.

253 20. RELATED PARTY TRANSACTIONS In addition to those transactions referred to in note 38 of Part 5: Accountants’ Reports and Financial Information in relation to The Corporation of Lloyd’s, the International Underwriting Association, BAE Systems, Deutsche Bank and Aon Limited, the following related party transactions between the Company and members of the Group have been entered into in the period between 1 January 2004 and the date of this document: 20.1 shareholders of the Group’s Enterprise Partnerships are typically also customers of the Enterprise Partnership. As such, trading in the normal course of business has continued between the Group and Enterprise Partnership partners; 20.2 the Group acquired the minority interests in the two Enterprise Partnerships in which BAE Systems was the shareholder partner (HR Enterprise Limited and XPS). These acquisitions are effective from 1 January 2007. Further details of these acquisitions are set out in paragraphs 18.6 and 18.8 of Part 8: Additional Information; 20.3 a number of loans were provided by the Xchanging B.V. 2007 Employee Benefit Trust to certain Directors and members of senior management of the Group to fund the purchase price of 1,215,766 Class F Common Shares which were issued in February 2007. Further details of the loans are set out in paragraph 8.7 of this Part 8: Additional Information; 20.4 the Group contracted a gain sharing procurement outsourcing deal during 2006 with Liberata, a company which shares the same Major Shareholder as the Group, General Atlantic. The contract covers BPO customers of Liberata for which the Group provides procurement services for various indirect spend categories; and 20.5 the Group has a contract for services with Mr Hans Maret, a non-executive director of the Group. The contract is for advisory services, specifically to assist with the development of the Group in Germany. Further details of this arrangement are set out in paragraph 7.2.6 of this Part 8: Additional Information. 20.6 a contract for the provision of security and derivative transactions by Xtb to Sal. Oppenheim jr. & Cie. KGaA was entered into on 29 December 2004. Mr Friedrich Carl Janssen is a partner in Sal. Oppenheim which on Admission will be a 2.2% shareholder in the Company as set out in paragraph 5 of Part 2: Directors, Senior Managers, Employees and Corporate Governance.

21. CONSENTS 21.1 PricewaterhouseCoopers LLP whose registered office is at 1 Embankment Place, London WC2N 6RH is a member of the Institute of Chartered Accountants in England and Wales and has given and has not withdrawn its written consent to the inclusion of its reports set out in Part 5: Accountants’ Reports and Financial Information and Part 6: Unaudited Pro Forma Financial Information respectively and the references to its reports in the form and context in which they are included and has authorised the contents of its reports for the purposes of Rule 5.5.3R(2)(f) of the Prospectus Rules. A written consent under the Prospectus Rules of the FSA is different from a consent filed with the SEC under section 7 of the Securities Act which is applicable only to transactions involving securities registered under the Securities Act. As the offered securities have not been and will not be registered under the Securities Act, PricewaterhouseCoopers LLP has not filed a consent under section 7 of the Securities Act. 21.2 IDC has given and has not withdrawn its written consent to the inclusion in this document of its name and the references thereto in the form and context in which it appears.

22. GENERAL 22.1 The Offer Price which is to be paid in cash represents a premium of 235p over the nominal value of 5p per Share. 22.2 The Global Offer is being underwritten in full by the Underwriters pursuant to the Underwriting Agreement, details of which are set out in paragraph 7 of Part 3: The Global Offer. 22.3 The total costs, charges and expenses in connection with the Global Offer are estimated to be £10 million (assuming that the full discretionary fee is paid to the Underwriters) (exclusive of VAT).

254 22.4 The Company confirms that the information sourced from IDC has been accurately reproduced and so far as the Company is aware and has been able to ascertain from that published information, no facts have been omitted which would render the reproduced information inaccurate or misleading. 22.5 The financial information concerning the Company contained in this document does not constitute statutory accounts within the meaning of section 240(5) of the Act. Full individual accounts of the Company in respect of the period from its incorporation on 16 May 2006 to 31 December 2006 were reported on by PricewaterhouseCoopers LLP of 1 Embankment Place, London EC2Y 8HQ, the auditors of the Company within the meaning of section 235 of the Act and have been delivered to the Registrar of Companies.

23. DOCUMENTS FOR INSPECTION 23.1 Copies of the following documents will be available for inspection during normal business hours on any weekday (Saturdays, Sundays and public holidays excepted) at the offices of Clifford Chance LLP at 10 Upper Bank Street, London E14 5JJ from the date of this document until Admission: 23.1.1 the Memorandum and Articles of Association of the Company; 23.1.2 the reports by PricewaterhouseCoopers LLP set out in Part 5: Accountants’ Reports and Financial Information and Part 6: Unaudited Pro Forma Financial Information of this document; 23.1.3 the audited consolidated accounts of the Group for the two financial years ended 31 December 2006 and the audited results of the Company for the period ended 31 December 2006; and 23.1.4 this document.

Dated: 25 April 2007

255 PART 9: DEFINITIONS AND GLOSSARY The following definitions apply throughout this document unless the context requires otherwise:

DEFINITIONS

‘‘1.71% Senior Convertible notes evidencing debt of Xchanging B.V. and issued pursuant to a Promissory Notes’’ note commitment agreement dated 23 January 2004 between Xchanging B.V., General Atlantic Partners (Bermuda), L.P., GAP-W International, LLC, GapStar, LLC, GAP Coinvestment Partners II, L.P. and GAPCO GmbH & Co. KG (as amended from time to time)

‘‘2006 Act’’ the Companies Act 2006 of England and Wales

‘‘52nd Street Associates’’ 52nd Street Associates Inc.

‘‘Accountants’ Reports’’ those accountants’ reports on the Group and the Company set out in Part 5: Accountants’ Reports and Financial Information and Part 6: Unaudited Pro Forma Financial Information of this document

‘‘Acquisition’’ the acquisition of Xchanging B.V. by means of the offer comprised in the Takeover Offer Agreement and the Employers Offer Letters

‘‘Act’’ the Companies Act 1985 of England and Wales (as amended)

‘‘Acts’’ the Act and the 2006 Act

‘‘Admission to Listing’’ the admission to listing on the Official List of the Shares

‘‘Admission to Trading’’ the admission to trading on the London Stock Exchange’s market for listed securities of the Shares

‘‘Admission’’ Admission to Listing and Admission to Trading and a reference to Admission becoming ‘‘effective’’ is to be construed in accordance with the Listing Rules or the Standards (as applicable)

‘‘AGM’’ annual general meeting

‘‘Aon’’ Aon Limited

‘‘Approved Share Option Plan’’ the share option plan established by a resolution of the management board of Xchanging B.V. on 19 April 2000, as amended with Inland Revenue approval up to and including 25 February 2005, and referred to as the Xchanging Group Approved Share Option Plan

‘‘Articles of Association’’ or the articles of association of the Company which have been adopted ‘‘Articles’’ conditional on Admission

‘‘Audit Committee’’ the audit committee referred to in paragraph 5 of Part 2: Directors, Senior Managers, Employees and Corporate Governance of this document

‘‘AXA’’ AXA Corporate Solutions

‘‘BAE Systems’’ BAE Systems PLC

‘‘BAE Warrant’’ has the meaning given in paragraph 18.2 of Part 8: Additional Information of this document

‘‘BaFin’’ the German Federal Financial Supervisory Authority (‘‘Bundesanstalt fur¨ Finanzdienstleistungsaufsicht’’)

‘‘Board’’ the board of directors of the Company

256 ‘‘BPO’’ Business Process Outsourcing—the outsourcing of business functions or processes to a third party

‘‘Bridgewell’’ Bridgewell Limited in its capacity as Co-Lead Manager, of Old Change House, 128 Queen Victoria Street, London EC4V 4BJ

‘‘CAGR’’ compound annual growth rate

‘‘Chief Executive Officer’’ David Andrews

‘‘Citigroup’’ Citigroup Global Markets Limited, in its capacity as Sponsor, and/or Citigroup Global Market U.K. Equity Limited in its capacity as Joint Global Co-ordinator and Joint Bookrunner, both of Citigroup Centre, Canada Square, Canary Wharf, London E14 5LB, as the context may require

‘‘Class B Common Shares’’ class B common shares of A0.01 each in the capital of Xchanging B.V.

‘‘Class F Common Shares’’ class F common shares of A0.01 each in the capital of Xchanging B.V.

‘‘Clifford Chance Nominees a subscriber to the Memorandum of Association of the Company Limited’’

‘‘Clifford Chance Secretaries a subscriber to the Memorandum of Association of the Company Limited’’

‘‘Code’’ the US Internal Revenue Code of 1986, as amended

‘‘Co-Lead Managers’’ Bridgewell Limited and Jefferies International Limited

‘‘Combined Code’’ the Combined Code on Corporate Governance published by the Financial Reporting Council in July 2006

‘‘Common Shares’’ common shares of A0.01 each in the capital of Xchanging B.V. and any other common shares of Xchanging B.V.

‘‘Company’’ or ‘‘Xchanging’’ Xchanging plc

‘‘Convertible Preference Class A convertible preference class A shares of A0.01 each in the capital of Shares’’ Xchanging B.V.

‘‘Convertible Preference Class B convertible preference class B shares of A0.01 each in the capital of Shares’’ Xchanging B.V.

‘‘Convertible Preference Class C convertible preference class C shares of A0.01 each in the capital of Shares’’ Xchanging B.V.

‘‘Convertible Preference Class D convertible preference class D shares of A0.01 each in the capital of Shares’’ Xchanging B.V.

‘‘Convertible Preference Class E convertible preference class E shares of A0.01 each in the capital of Shares’’ Xchanging B.V.

‘‘CREST’’ the system for paperless settlement of trades in listed securities, of which CRESTCo Limited is the operator

‘‘Deutsche Bank’’ Deutsche Bank AG

‘‘Directors’’ the Executive Directors and the Non-Executive Directors

‘‘Disclosure Rules’’ the rules relating to the disclosure of information made in accordance with section 73A of FSMA

‘‘Dutch Civil Code’’ the Dutch Civil Code (‘‘Burgerlijk Weboek’’)

257 ‘‘Employee Offer Letters’’ the employee offer letters defined in paragraph 3.4.2 and further described in paragraph 18.10 each of Part 8: Additional Information of this document

‘‘Employee Share Plans’’ the Approved Share Option Plan, the Unapproved Share Option Plan, the Unapproved G Share Option Plan, the SPP, the PSP and the ESOP

‘‘Enterprise Partnership’’ or a corporate partnership between the Group and a customer, as ‘‘EP’’ described in Part 1: Information on the Group of this document

‘‘ESOP’’ the Xchanging plc 2007 Executive Share Option Plan established by a resolution of the Board on 23 April 2007

‘‘European Economic Area’’ the European Economic Area created pursuant to the European Economic Area Agreement which came into force on 1 January 2004

‘‘Exchange Act’’ the United States Securities Exchange Act of 1934 (as amended)

‘‘Executive Committee’’ the members of the Xchanging Executive Committee which include Clive Buesnel, Hugh Morris, Melissa Pitt, Gary Whitaker and other senior management

‘‘Executive Directors’’ David Andrews, Richard Houghton and Adele Browne

‘‘Existing Shares’’ the Shares (other than the New Shares) that will be in issue on Admission

‘‘Financial Year 2004’’ the year ended 31 December 2004

‘‘Financial Year 2005’’ the year ended 31 December 2005

‘‘Financial Year 2006’’ the year ended 31 December 2006

‘‘FSA’’ The Financial Services Authority acting in its capacity as the competent authority for the purposes of Part IV of FSMA

‘‘FSMA’’ Financial Services and Markets Act 2000, as amended

‘‘GAAP’’ generally accepted accounting principles

‘‘General Atlantic’’ General Atlantic Partners 55, L.P.; GAP-Xchange Partners, L.L.C., SCA; GAP Coinvestment Partners, L.P.; GAP Coinvestment Partners II, L.P.; General Atlantic Partners (Bermuda), L.P.; GapStar, LLC; GAPCo GMBH & Co. KG; and GAP-W International, L.P.

‘‘General Atlantic Director’’ a non-executive director appointed to the Board by General Atlantic pursuant to the Relationship Agreement

‘‘Global Offer’’ the offer of Shares to institutional and certain other investors described in Part 3: The Global Offer

‘‘Group’’ prior to the Acquisition, Xchanging B.V. and its subsidiary undertakings, from time to time and, once the Acquisition has taken place, the Company and its subsidiaries and subsidiary undertakings, from time to time

‘‘G Shares’’ class G shares of A0.01 each in the capital of Xchanging B.V.

‘‘HMRC’’ United Kingdom’s H.M. Revenue & Customs

‘‘IAS’’ International Accounting Standards

258 ‘‘IDC’’ global provider of market intelligence, advisory services, and events for the information technology, telecommunications, and consumer technology markets

‘‘IFRS’’ International Financial Reporting Standards, as adopted by the European Union

‘‘Infrex Employee Share Trust’’ the trust established by Xchanging UK Limited, David Andrews and John Bramley on 3 December 1999

‘‘IRS’’ US Internal Revenue Services

‘‘ITEPA’’ Income Tax (Earnings and Pensions) Act 2003 of the UK

‘‘IUA’’ International Underwriting Association

‘‘Jefferies’’ Jefferies International Limited of Floor 4, Bracken House, 1 Friday Street, London EC4M 9JA

‘‘Joint Bookrunners’’ Citigroup Global Markets U.K. Equity Limited and UBS Limited

‘‘Joint Global Co-ordinators’’ Citigroup Global Markets U.K. Equity Limited and UBS Limited

‘‘Listing Rules’’ the rules and regulations made by the FSA under Part VI of FSMA

‘‘Lloyd’s’’ The Society Incorporated by the Lloyd’s Act 1871 by the name of Lloyd’s

‘‘London Stock Exchange’’ London Stock Exchange plc

‘‘Major Shareholder’’ General Atlantic

‘‘Memorandum of Association’’ the memorandum of association of the Company

‘‘MiFID’’ the Markets in Financial Instruments Directive (2004/39/EC)

‘‘Model Code’’ the model code on directors’ dealings in securities as set out in the Listing Rules

‘‘New Shares’’ Shares to be issued by the Company under the Global Offer

‘‘Nomination Committee’’ the nomination committee referred to in paragraph 5 of Part 2: Directors, Senior Managers, Employees and Corporate Governance of this document

‘‘Non-Executive Directors’’ John Robins, John Bramley, Stephen Brenninkmeijer, Dennis Millard, Nigel Rich, David Hodgson, Tom Tinsley, Johannes Maret and Friedrich Carl Janssen

‘‘Offer Price’’ the price of 240p per Share at which Shares are to be issued or sold under the Global Offer

‘‘Official List’’ the Official List of the FSA

‘‘Ogier Employee Benefit the trustee of the Xchanging B.V. 2007 Employee Benefit Trust and Trustee Limited’’ the Xchanging Employee Benefit Trust, an independent professional trustee situated in Jersey

‘‘Option Rollover Letters’’ the option rollover letters described in paragraph 18.11 of Part 8: Additional Information

‘‘Over-allotment Option’’ the option granted by General Atlantic pursuant to which the Joint Global Co-ordinators may require General Atlantic to sell additional Existing Shares at the Offer Price

259 ‘‘Over-allotment Shares’’ Shares sold pursuant to the Over-allotment Option

‘‘Panel on Takeovers and the UK Panel on Takeovers and Mergers Mergers’’

‘‘PFIC’’ passive foreign investment company

‘‘Pro Forma Financial the unaudited pro forma financial information in Part 6: Unaudited Information’’ Pro Forma Financial Information of this document

‘‘Prospectus Directive’’ Directive 2003/7/EC

‘‘Prospectus Rules’’ rules published by the FSA under section 73A FSMA

‘‘Prospectus’’ the final prospectus in connection with Admission

‘‘PSP’’ the performance share plan established by a resolution of the Board of Xchanging on 23 April 2007 and referred to as The Xchanging plc 2007 Performance Share Plan

‘‘Qualified Institutional Buyers’’ has the meaning given in Rule 144A under the Securities Act or ‘‘QIBs’’

‘‘Rebus Loan’’ the £15,000,000 loan to the Company originally from Rebus Insurance Services Holdings and subsequently assigned to General Atlantic Partners (Bermuda), L.P. and GAP Coinvestment Partners II, L.P.

‘‘Registrar’’ Lloyd’s TSB Registrars

‘‘Regulation S’’ Regulation S under the Securities Act

‘‘Regulations’’ the Uncertificated Securities Regulations 2001 (SI 2001 No. 3755)

‘‘Relationship Deed’’ the relationship deed between the Company and General Atlantic described in paragraph 18.13 of Part 8: Additional Information of this document

‘‘Relevant Member State’’ each member of the European Economic Area which has implemented the Prospectus Directive

‘‘Remuneration Committee’’ the remuneration committee referred to in paragraph 5 of Part 2: Directors, Senior Managers, Employees and Corporate Governance of this document

‘‘Responsible Persons’’ the Company, the Directors and, with respect to its reports in Parts 5 and 6 to the extent set out in its reports only, PricewaterhouseCoopers LLP

‘‘Rule 144A’’ Rule 144A under the Securities Act

‘‘Sal. Oppenheim’’ Sal. Oppenheim jr. & Cie. KGaA

‘‘Scheme A Shares’’ shares of A0.01 each in the capital of Xchanging B.V.

‘‘Scheme B Shares’’ shares of A0.01 each in the capital of Xchanging B.V.

‘‘SDRT’’ stamp duty reserve tax

‘‘SEC’’ U.S. Securities and Exchange Commission

‘‘Securities Act’’ the United States Securities Act of 1933 (as amended)

‘‘Selling Shareholders’’ persons listed in the table set out in paragraph 19.1 of Part 8: Additional Information

260 ‘‘Senior Managers’’ those persons named in paragraph 2 of Part 2: Directors, Senior Managers, Employees and Corporate Governance of this document

‘‘Shares’’ ordinary shares of 5p each in the capital of the Company

‘‘SPP’’ or the share purchase plan established by a resolution of the ‘‘Share Participation Plan’’ management board of Xchanging B.V. on 16 January 2007 and referred to as The Xchanging Share Purchase Plan 2007

‘‘Stabilising Manager’’ UBS Limited

‘‘Standards’’ the Admission and Disclosure Standards of the London Stock Exchange

‘‘Subsidiary’’ or ‘‘Subsidiaries’’ any subsidiary or subsidiary undertaking, from time to time, of the Company

‘‘Takeover Code’’ the City Code on Takeovers and Mergers

‘‘Takeover Offer Agreement’’ the takeover offer agreement described in paragraph 18.9 of Part 8: Additional Information of this document

‘‘UBS’’ or ‘‘UBS Investment UBS Limited in its capacity as Joint Global Co-ordinator and Joint Bank’’ Bookrunner

‘‘UK GAAP’’ generally accepted accounting principles in the United Kingdom

‘‘UK’’ or ‘‘United Kingdom’’ the United Kingdom of Great Britain and Northern Ireland

‘‘Unapproved G Share Option the unapproved share option plan relating to G Shares in Xchanging Plan’’ B.V. established by a resolution of the management board of Xchanging B.V. on 28 April 2004, as amended, and referred to as the Xchanging Group Unapproved G Share Option Plan

‘‘Unapproved Share Option the unapproved share option plan established by a resolution of the Plan’’ management board of Xchanging B.V. on 25 July 2000, as amended, and referred to as the Xchanging Group Unapproved Share Option Plan

‘‘Underwriters’’ Citigroup Global Markets U.K. Equity Limited, UBS Limited, Bridgewell Limited and Jefferies International Limited

‘‘Underwriting Agreement’’ the underwriting agreement described in paragraph 7 of Part 3: The Global Offer of this document

‘‘US GAAP’’ generally accepted accounting principles in the US

‘‘US’’ or ‘‘United States’’ United States of America, its territories and possessions, any state of the United States and the District of Columbia

‘‘US Holder’’ a beneficial owner of Shares that is for US federal income tax purposes: (i) a citizen or resident alien of the United States; (ii) a corporation or other entity treated as a corporation for US federal income tax purposes created or organised in or under the laws of the United States or any state thereof (including the District of Columbia); (iii) an estate, the income of which is subject to US federal income taxation regardless of its source; or (iv) a trust if (x) a court within the United States is able to exercise primary supervision over its administration and (y) one or more United States persons (as defined in the Code) have the authority to control all of the substantial decisions of such trust

261 ‘‘US-UK Treaty’’ the income tax treaty between the United States and the United Kingdom

‘‘Xchanging Broking Services one of the companies in the Group, a private company limited by Limited’’ or ‘‘XBS’’ shares incorporated in England and Wales

‘‘Xchanging B.V.’’ the previous holding company of the Group (formerly known as Xchange B.V.), a private company with limited liability (‘‘besloten vennootschap met beperkte aansprakeliijkheid’’) incorporated in The Netherlands

‘‘Xchanging B.V. 2007 Employee the trust established by Xchanging B.V. on 23 January 2007 Benefit Trust’’

‘‘Xchanging Employee Benefit the trust bearing that name as established by a trust deed dated Trust’’ 9 February 2006 and executed by (1) Xchanging UK Limited and (2) Ogier Employee Benefit Trustee Limited

‘‘Xchanging Human Resources one of the companies in the Group, a private company limited by Services Limited’’ or ‘‘XHRS’’ shares incorporated in England and Wales

‘‘Xchanging Insurance one of the companies in the Group, a private company limited by Professional Services Limited’’ shares incorporated in England and Wales or ‘‘XIPS’’

‘‘Xchanging Insurance Technical one of the companies in the Group, a private company limited by Services Limited’’ or ‘‘XITS’’ shares incorporated in England and Wales

‘‘Xchanging Limited’’ one of the companies in the Group, a private company limited by shares incorporated in England and Wales

‘‘Xchanging Procurement one of the companies in the Group, a private company limited by Services Limited’’ or ‘‘XPS’’ shares incorporated in England and Wales

‘‘Xchanging Transaction Bank one of the companies in the Group, a German credit institution GmbH’’ or ‘‘Xtb’’

‘‘Xchanging UK Limited’’ one of the companies in the Group, a private company limited by shares incorporated in England and Wales

‘‘XEBIT’’ Xchanging B.V.’s Earnings Before Interest and Tax (see Part 4: Operating and Financial Review, 5. Key Performance Indicators)

‘‘XIS’’ Ins-sure Holdings Limited, one of the companies in the Group, a private company limited by shares incorporated in England and Wales, and its subsidiaries

‘‘XPAT’’ Xchanging B.V.’s Profit After Tax (see Part 4: Operating and Financial Review, 5. Key Performance Indicators)

In this document, words denoting any gender include all genders (unless the context otherwise requires).

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13 Hanover Square

London • W1S 1HN • UK

Telephone +44 (0)20 7780 6999 Facsimile +44 (0)20 7780 6998

Email [email protected]

© 2007 Xchanging plc (Registered in England and Wales company number 5819018, Registered office 34 Leadenhall Street, London EC3A 1AX)