485 Lexington Avenue
New York, New York
10017-5516

212-953-4444(v)
212-972-4502(f)
www.novantas.com

February 15, 2009

2009 Management Letter

We provide advisory and information solutions to improve client performance.

Novantas set out a decade ago to redefine how advisory services and business solutions are delivered to the services industries. The success we have had in doing so is attributable to world class talent in our client organizations and among those who have chosen to become members of our Firm.

The Firm remains distinctive in the industry through our focus on Customer Sciences, which is to say, on strategic and tactical decisions that effect growth in revenue. During the past decade, we have developed exceptionally disciplined and superior approaches to defining, building, managing and measuring revenue-generating capabilities — branding, market mix management, segmentation, product design, pricing, distribution management, sales execution effectiveness, risk management, and customer experience. We work with leading clients to develop these customer-focused strategies, and provide strategy implementation and information services to help clients measure and maximize competitive positioning.

By all measures, 2008 was a particularly difficult year for banks and the financial industries in general. The U.S. investment banking industry largely disappeared, with all five leading firms becoming, or absorbed by, commercial banks, or driven into bankruptcy. Three of the top ten commercial banks were absorbed by competitors to avoid more dire outcomes. All competitors have seen share prices plunge to levels not seen for more than a decade.

Consultants to the financial services industry in general faced a similar fate. To our understanding, many of our competitors have lost significant revenue and have begun to engage in the difficult downsizing that inevitably follows such a market dislocation.

We believe in comparison, Novantas showed remarkable resiliency. While we did not achieve our historic level of 35% growth in 2008, we found that we have grown modestly at 10%, and more importantly, secured our position with key clients and partners. We experienced growth in all three business lines — Consulting Services, Information Services and Research Services.

In Consulting Services, we expanded our service portfolio dramatically in Payments Networks, Consumer Credit and Risk. The Firm has increased its penetration in Europe and built out its services to Brokerage, Insurance and Wealth Management firms. We have solidified our market dominance of retail bank pricing, now having served most of the top twenty U.S. banks in developing and installing elasticity based pricing capabilities for deposit and loan products. In our continuing effort to focus the business on financial industries, we have divested the company of its Airlines consulting unit and reinvested in segments and capabilities more tightly aligned with financials.

In Information Services, the company’s Qualytix subsidiary has established a leading market position in deposit and loan pricing systems through PriceTek™, in branch performance management through BranchScape™, in small business market management through DemandScape™, and in call center campaign testing and management through Mindswift®. New information-based products are in the pipeline with particular focus on the insurance and brokerage industries. The information subsidiary continues to contribute 25% of enterprise-wide revenue on an ongoing basis.

In Research Services, our newly launched Novarica Insurance Technology Research subsidiary exceeded performance expectations in its first year of operation. Currently serving more than 60 major insurance companies and vendors, the company has produced highly acclaimed new reports including MarketNavigator, and ACE ranking.

We relocated and expanded offices in Chicago in 2008, and completed our relocation in New York City, which now covers three floors at 485 Lexington Avenue. We continue to grow our Toronto and Madrid operations and are investigating expanding and making permanent our offices in London.

The Firm’s work with the major industry associations continues to expand, as well as our presence at U.S. business schools. Our Managing Directors are on the banking faculty of the Graduate School Program sponsored by the Bank Administrative Institute and Consumer Bankers Association. We have developed a strategic alliance with the Medical Information Board, one of the largest service associations serving life and health insurers. Our Managing Directors are affiliated with teaching and research programs at Columbia, Wharton, and Yale.

Despite the dramatic industry downturn, our clients have proven to be strong and adaptive, and business relationships continue to be extremely strong in our core clients. We are grateful for the continued success of these clients and for the opportunity to contribute to their successes. We look forward to 2009 with cautious optimism, reflective of the complex and unknown effects of the current economic turmoil. Yet we recognize that our future growth depends upon our continued ability to serve the most capable executives, in the world’s most successful institutions, by providing the best talent and service offerings, to solve the toughest problems.

Sincerely,

David G. Kaytes
Managing Director