Strategic rationale for the partnership

This EP will combine Xchanging’s European expertise in securities processing and investment account administration with Kedrios’ strengths in fund administration and in the Italian market. This partnership will be an important building block for the creation of a pan-European operator for securities processing, investment account administration and fund administration to blue-chip financial markets customers. In particular this partnership delivers the following benefits:

-  allows Xchanging to serve its existing customers who have operations in the Italian market
-  expands Xchanging’s international customer base
-  adds a new platform generating scale within Xchanging’s financial markets operations.
Kedrios will add value to the Xchanging’s entry strategy in Italy with its deep knowledge in financial services, IT and business process outsourcing, as well as its strong customer relationships and robust technology solutions.

In addition, SIA-SSB and Xchanging are assessing the possibility of leveraging Xchanging’s pan-European expertise in procurement services. The EP with SIA-SSB also provides a great opportunity for Xchanging to further develop its strategic 10% investment in CAD IT who in the future could become the software provider for the new partnership. CAD IT is the leading securities processing software provider in Italy with about 80% market share.

David Andrews, CEO Xchanging said, “This Enterprise Partnership with SIA-SSB is a logical step in the growth strategy of Xchanging in the Continental European market for financial services as well as procurement. We have built a strong position in the securities processing and investment account administration markets in Germany and expanded procurement operations in France, Germany, Spain and the Benelux. This new partnership leverages our successful platforms and gives us future opportunities for growth in the region. It reaffirms our commitment to grow rapidly through our Enterprise Partnership model”.

Massimo Arrighetti, CEO SIA-SSB said, “As a result of this partnership with leading international business processor Xchanging, we can now achieve two main goals - on the one hand expanding the range of Kedrios business services and customers and on the other hand maintaining and developing Kedrios’ professional skills and technological know-how; the company’s two key strengths since its creation in 2001”.

Matthias Sohler, Managing Director, Continental Europe for Xchanging added, “With this market entry into Italy, we will now be able to serve our existing customers in the banking, asset management and insurance market in Italy. We are building the foundation for a large, independent financial market operator, covering all relevant aspects of a pan-European transaction bank in securities operations, investment account administration and fund administration”.

Enterprise Partnership details

Revenues for Kedrios for the year ended 31 December 2009 were €18.0 million ¹. The impact on Xchanging’s financials in 2010 is not expected to be material. Xchanging is confident that it can leverage its expertise and capabilities to grow the business as it has its other EPs. Xchanging’s comprehensive processing initiatives are anticipated to yield significant savings, such that the EP is expected to break even during 2011, and deliver profits to the Group in 2012.

Xchanging will subscribe to a 51% stake in the EP through a share capital increase and invest in the EP over the next two years to re-organise the business and create a platform for future growth. Xchanging expects to grant SIA-SSB the option to sell its shareholding to Xchanging after the third anniversary of change of control.

The consideration and subsequent investments will be funded through existing cash resources. Further announcements will be made when the terms of the deal are finalised and agreed, which is expected to be in the third quarter of 2010.

About Xchanging’s Continental European presence

The core of Xchanging’s financial markets business is the Frankfurt based Xchanging Transaction Bank (XTB – Xchanging’s EP with Deutsche Bank). XTB provides a complete range of securities processing services. Xchanging provides retail and institutional investment account administration services and an open fund platform to financial market participants in Germany through Fondsdepot Bank (Xchanging’s EP with Allianz Global Investors). It is the leading independent provider of investment account administration services in Germany. By the end of 2010, Xchanging will have 1.6 million active investment accounts, €31 billion assets under administration and will cover approximately 100,000 individual sales agents.

¹ This excludes revenues from a business unit that was disposed of in March 2010.