Capita Regulatory News (CPI)

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN OR INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION.

FOR IMMEDIATE RELEASE

14 October 2015

RECOMMENDED FINAL CASH OFFER

for

XCHANGING PLC

by

CAPITA PLC

Summary

· The boards of directors of Capita plc ("Capita") and Xchanging plc ("Xchanging") are pleased to announce that they have reached agreement on the terms of a recommended final cash offer for Xchanging by Capita pursuant to which Capita will acquire the entire issued and to be issued share capital of Xchanging (the "Offer"). It is intended that the Offer will be implemented by means of a takeover offer under the Code and within the meaning of Part 28 of the Companies Act 2006.

· Under the terms of the Offer, Xchanging Shareholders will receive:

for each Xchanging Share 160 pence per share in cash

· The Offer values the entire issued and to be issued share capital of Xchanging at approximately £412 million, and represents a premium of approximately:

· 44 per cent. to the Closing Price of 111 pence per Xchanging Share on 2 October 2015, being the last Business Day prior to the commencement of the Offer Period;

· 52 per cent. to the average Closing Price of 105 pence per Xchanging Share for the three months ended on 2 October 2015, being the last Business Day prior to the commencement of the Offer Period; and

· 64 per cent. to the average Closing Price of 98 pence per Xchanging Share for the month ended on 2 October 2015, being the last Business Day prior to the commencement of the Offer Period.

· The Offer is final and is not capable of being increased, save that Capita has reserved the right to increase the price per Xchanging Share payable pursuant to the terms of the Offer in the event that a third party announces a firm intention to make an offer for Xchanging pursuant to Rule 2.7 of the Code.

· The acquisition of Xchanging by Capita is consistent with Capita's stated strategy of acquiring businesses that build capability in existing operations, allow Capita to enter new attractive industry segments and enhance its future organic growth potential.

· The Capita Board believes that the acquisition would:

· position Capita as one of the leading providers of technology-enabled business process services ("BPS") in the attractive international insurance and asset administration industries;

· provide a stronger platform for Xchanging to accelerate sales growth and to develop its software, technology and procurement solutions under Capita's stewardship; and

· enable Capita to secure at least £35 million in cost synergy benefits driven by head office, shared services and IT efficiencies in FY2017, at a cost of around £20 million in the first 12 months after acquisition.

· The Offer is expected to be immediately earnings accretive for Capita and to deliver returns significantly in excess of Capita's cost of capital.

· The cash consideration payable pursuant to the Offer will be financed initially through a bridging loan facility (the "Bridge Facility Agreement"). Capita intends to utilise the proceeds from a placing of New Capita Shares (the "Capita Share Issue") (if effected) to refinance the Bridge Facility Agreement. The Offer is not conditional on the Capita Share Issue.

· The Offer will require the launch of a tender offer for the free float of Xchanging Solutions Limited, a subsidiary of Xchanging with a dual listing on the NSE and BSE, and Capita intends to follow due process in relation to this tender offer.

· The Xchanging Directors, who have been so advised by Lazard as to the financial terms of the Offer, consider the terms of the Offer to be fair and reasonable. In providing its advice to the Xchanging Directors, Lazard has taken into account the commercial assessments of the Xchanging Directors. Lazard is providing independent financial advice to the Xchanging Directors for the purposes of Rule 3 of the Code.

· In the absence of a higher offer, the Xchanging Directors intend unanimously to recommend that Xchanging Shareholders accept the Offer. If no higher competing offer from a third party is made by the PUSU Deadline, the Xchanging Directors who hold or are beneficially entitled to Xchanging Shares will accept the Offer in respect of their own beneficial holdings of Xchanging Shares amounting to, in aggregate, 1,155,683 Xchanging Shares representing approximately 0.47 per cent. of the issued share capital of Xchanging as at 13 October 2015, being the last Business Day prior to the date of this announcement.

· Geoff Unwin has abstained from voting at the Xchanging Board in connection with advice to be given to Xchanging Shareholders in connection with the Offer, in light of his share matching arrangements with Xchanging.[1]

· Capita is a leading UK provider of technology-enabled customer and business process services ("BPS") and integrated professional support services. With 68,000 people at over 400 sites, including 80 business centres across the UK, Europe, India and South Africa, Capita uses its expertise, infrastructure and scale benefits to transform its clients' services, driving down costs and adding value. Capita is quoted on the London Stock Exchange (CPI.L), and is a constituent of the FTSE 100 with 2014 revenue of £4.4 billion. Further information on Capita can be found at: www.capita.co.uk.

· Xchanging is a business technology and services provider. Xchanging uses innovation, technology and customer and market insight to provide differentiated solutions to its customers' operational and business processing challenges. Xchanging manages complex, large-scale back and middle office processes for its customers, providing an improved service at a lower cost than when these functions are performed internally. Xchanging's core business is the management of customers' business processes. Xchanging has offerings in three business areas: business process services, technology and procurement.

· The Offer is conditional upon, amongst other things: (i) valid acceptances being received in respect of Xchanging Shares which, together with any Xchanging Shares acquired by Capita (whether pursuant to the Offer or otherwise) constitute not less than 90 per cent. in nominal value of the Xchanging Shares to which the Offer relates and represent not less than 90 per cent. of the voting rights attached to such Xchanging Shares; (ii) the FCA having notified Capita and/or Xchanging of its approval of the change of control of any UK authorised persons within the Xchanging Group as a result of the Acquisition (or the requisite waiting period for such approval to be provided having elapsed without the FCA having objected to the Acquisition); (iii) BaFin having notified Capita and/or Xchanging that it has no objections to the proposed acquisition of a substantial holding in a German institution supervised under the KWG in the Wider Xchanging Group by Capita (or the requisite waiting period for such approval to be provided having elapsed without the BaFin having objected to the proposed acquisition of such substantial holding); (iv) in so far as the Offer is required to be notified under the US merger control regime, all necessary notifications and filings having been made and all applicable waiting periods (including any extensions thereof) under the United States Hart-Scott-Rodino Antitrust Improvements Act of 1976 (as amended) having expired, lapsed or been terminated without a request for additional information having been made by the FTC or the Antitrust Division of the Department of Justice; and (v) in so far as the Offer is required to be notified under the German merger control regime, the German Bundeskartellamt deciding that the prohibition criteria in German Act against Restraints of Competition are not satisfied, or being deemed to have made such a decision. Appendix 1 to this announcement sets out the Conditions and further terms to which the Offer will be subject, including details of requisite regulatory and merger control approvals. The Offer does not require the approval of Capita shareholders.

· The Offer can only become effective if all Conditions to the Offer have been satisfied or, where applicable, waived. Subject to the satisfaction or, where applicable, waiver of the Conditions, it is expected that completion of the Acquisition will occur at or around the end of 2015/early 2016 following the receipt of relevant merger control clearances and regulatory approvals.

· Full acceptance of the Offer will result in the payment by Capita of approximately £412 million in cash to Xchanging Shareholders (and participants in the Xchanging Share Schemes).

· Capita reserves the right, subject to the consent of the Panel, to effect the Offer by way of a Court-sanctioned scheme of arrangement under Part 26 of the Companies Act 2006.

· The Offer Document, containing further information about the Offer, will be published, other than with the consent of the Panel, within 28 days of this announcement and will be made available on Capita's website at http://investors.capita.co.uk/capita-offer-for-xchanging-plc.aspx.

Commenting on the Offer, Ian Cormack[2], Senior Independent Non-Executive Director of Xchanging, said:

"The Xchanging Board and management team of Xchanging have built a strong business, through a combined organic and inorganic growth strategy. We consider the offer from Capita to be at a level that should be put to all shareholders. The terms of the offer, which represent a significant premium of 52% to the three month average price and 64% to the one month average price, provides certainty, in cash, to Xchanging Shareholders today."[3]

Commenting on the Offer, Martin Bolland, Chairman of Capita, said:

"The proposed acquisition of Xchanging is consistent with our stated strategy and will position Capita as a leading provider of technology-enabled business process services in the international insurance industry. We are excited by Xchanging's prospects and will build its skills and capabilities to provide a platform for enhanced organic growth for Xchanging. We believe this acquisition will create significant value for our shareholders and drive long term returns, with the businesses benefitting from a number of efficiencies and cost savings."

Capita will host a conference call and Q&A for analysts and investors at 8:00 a.m. (London time) today (14 October 2015) to discuss the Offer.

Please dial into the call in time to allow for registration.

Dial-in number: +44 (0) 20 3139 4830

Participant PIN Code: 54312217#

Replay: A replay of the conference call will be available for seven days by dialing +44 (0) 20 3426 2807 (access code is 663258#)

This summary should be read in conjunction with, and is subject to, the full text of this announcement (including the Appendices). The Offer will be subject to the Conditions and further terms set out in Appendix 1 to this announcement and to the full terms and conditions which will be set out in the Offer Document. Appendix 2 contains the bases and sources of certain information used in this summary and this announcement. Appendix 3 contains definitions of certain terms used in this summary and this announcement.

Enquiries:

Important notices relating to financial advisers and corporate brokers

Citigroup Global Markets Limited ("Citi"), which is authorised by the Prudential Regulation Authority and regulated in the United Kingdom by the Financial Conduct Authority and the Prudential Regulation Authority, is acting exclusively for Capita and no one else in connection with the Offer and will not be responsible to anyone other than Capita for providing the protections afforded to clients of Citi nor for providing advice in relation to the Offer or any other matters referred to in this announcement. Neither Citi nor any of its affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Citi in connection with this announcement, any statement contained herein, the Offer or otherwise.

Deutsche Bank AG is authorised under German Banking Law (competent authority: European Central Bank) and, in the United Kingdom, by the Prudential Regulation Authority. It is subject to supervision by the European Central Bank and by BaFin, Germany's Federal Financial Supervisory Authority, and is subject to limited regulation in the United Kingdom by the Prudential Regulation Authority and Financial Conduct Authority.

Deutsche Bank AG is a joint stock corporation with limited liability incorporated in the Federal Republic of Germany, Local Court of Frankfurt am Main, HRB No. 30 000; Branch Registration in England and Wales BR000005 and Registered Address: Winchester House, 1 Great Winchester Street, London EC2N 2DB. Deutsche Bank AG, London Branch is a member of the London Stock Exchange. (Details about the extent of our authorisation and regulation by the Prudential Regulation Authority, and regulation by the Financial Conduct Authority are available on request or from www.db.com/en/content/eu_disclosures.htm.).

Deutsche Bank AG, acting through its London branch ("Deutsche Bank"), is acting as a corporate broker to Capita and no other person in connection with the Offer, this announcement and its contents. Deutsche Bank will not be responsible to any person other than Capita for providing any of the protections afforded to clients of Deutsche Bank, nor for providing any advice in relation to any matter referred to herein. Without limiting a person's liability for fraud, neither Deutsche Bank nor any of its subsidiary undertakings, branches or affiliates nor any of its or their respective directors, officers, representatives, employees, advisers or agents owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Deutsche Bank in connection with this announcement, any statement contained herein or otherwise.

Lazard & Co., Limited ("Lazard"), which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting exclusively for Xchanging and no one else in connection with the Offer and will not be responsible to anyone other than Xchanging for providing the protections afforded to clients of Lazard nor for providing advice in relation to the Offer or any other matters referred to in this announcement. Neither Lazard nor any of its affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Lazard in connection with this announcement, any statement contained herein, the Offer or otherwise.

Investec Bank plc, which is authorised in the United Kingdom by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority, is acting exclusively for Xchanging and no-one else in connection with the Offer and will not be responsible to anyone other than Xchanging for providing the protections afforded to its clients or for providing advice in connection with the Offer or any other matters referred to in this announcement.

Liberum Capital Limited, which is authorised and regulated by the Financial Conduct Authority in the United Kingdom, is acting exclusively for Xchanging and for no one else in connection with the Offer and will not be responsible to anyone other than Xchanging for providing the protections afforded to its clients or for providing advice in connection with the Offer or any other matters referred to in this announcement.

Further information

This announcement is not intended to, and does not, constitute or form part of any offer, invitation or the solicitation of an offer to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of any securities, or the solicitation of any vote or approval in any jurisdiction, pursuant to the Offer or otherwise. The Offer will be made solely by means of the Offer Document and the Form of Acceptance accompanying the Offer Document, which will contain the full terms and conditions of the Offer, including details of how the Offer may be accepted. Any response to the Offer should be made only on the basis of information contained in the Offer Document. Xchanging Shareholders are advised to read the formal documentation in relation to the Offer carefully once it has been despatched.

This announcement has been prepared for the purposes of complying with English law, the rules of the London Stock Exchange and the Code and the information disclosed may not be the same as that which would have been disclosed if this announcement had been prepared in accordance with the laws and regulations of any jurisdiction outside the United Kingdom.

Overseas jurisdictions

The distribution of this announcement in jurisdictions other than the United Kingdom and the ability of Xchanging Shareholders who are not resident in the United Kingdom to participate in the Offer may be affected by the laws of relevant jurisdictions. Therefore any persons who are subject to the laws of any jurisdiction other than the United Kingdom or Xchanging Shareholders who are not resident in the United Kingdom will need to inform themselves about, and observe, any applicable legal or regulatory requirements. Any failure to comply with the applicable restrictions may constitute a violation of the securities laws of any such jurisdiction. Further details in relation to overseas shareholders will be contained in the Offer Document.

The Offer is not being, and will not be, made available, directly or indirectly, in or into or by the use of the mails of, or by any other means or instrumentality of interstate or foreign commerce of, or any facility of a national state or other securities exchange of any Restricted Jurisdiction, unless conducted pursuant to an exemption from the applicable securities laws of such Restricted Jurisdiction.

Accordingly, copies of this announcement and all documents relating to the Offer are not being, and must not be, directly or indirectly, mailed, transmitted or otherwise forwarded, distributed or sent in, into or from any Restricted Jurisdiction except pursuant to an exemption from the applicable securities laws of such Restricted Jurisdiction and persons receiving this announcement (including, without limitation, agents, nominees, custodians and trustees) must not distribute, send or mail it in, into or from such jurisdiction. Any person (including, without limitation, any agent, nominee, custodian or trustee) who has a contractual or legal obligation, or may otherwise intend, to forward this announcement and/or the Offer Document and/or any other related document to a jurisdiction outside the United Kingdom should inform themselves of, and observe, any applicable legal or regulatory requirements of their jurisdiction.

Notice to US holders of Xchanging Shares

The Offer, if required to be made, will be made in the United States pursuant to applicable exemptions under the US tender offer rules and securities laws and otherwise in accordance with the requirements of the Code, the Panel and the London Stock Exchange. Accordingly, the Offer will be subject to disclosure and other procedural requirements, including with respect to withdrawal rights, offer timetable, settlement procedures and timing of payments that are different from those applicable under US domestic tender offer procedures and law.

The Offer is being made for the securities of an English company with a listing on the London Stock Exchange. The Offer is subject to UK disclosure requirements, which are different from certain United States disclosure requirements. The financial information on both Capita and Xchanging included in this announcement has been prepared in accordance with IFRS, thus neither may be comparable to financial information of US companies or companies whose financial statements are prepared in accordance with generally accepted accounting principles in the United States.

The receipt of cash pursuant to the Offer by a US holder of Xchanging Shares may be a taxable transaction for US federal income tax purposes and under applicable US state and local, as well as foreign and other, tax laws. Each Xchanging Shareholder is urged to consult his independent professional adviser immediately regarding the tax consequences of accepting the Offer. Furthermore, the payment and settlement procedure with respect to the Offer will comply with the relevant United Kingdom rules, which differ from the United States payment and settlement procedures, particularly with regard to the date of payment of consideration.

The Offer will be made in the United States by Capita and no one else.

It may be difficult for US holders of Xchanging Shares to enforce their rights and any claim arising out of US federal securities laws, since Capita is incorporated under the laws of England and Wales and Xchanging is incorporated under the laws of England and Wales and some or all of their officers and directors are residents of non-US jurisdictions. In addition, most of the assets of Capita and Xchanging are located outside the United States. US holders of Xchanging Shares may not be able to sue a non-US company or its officers or directors in a non-US court for violations of US securities laws.

Further, it may be difficult to compel a non-US company and its affiliates to subject themselves to a US court's judgment.

This announcement does not constitute an offer of securities for sale in the United States or an offer to acquire or exchange securities in the United States. No offer to acquire securities or to exchange securities for other securities has been made, or will be made, directly or indirectly, in or into, or by the use of the mails of, or by any means or instrumentality of interstate or foreign commerce or any facilities of a national securities exchange of, the United States or any other country in which such offer may not be made other than: (i) in accordance with the tender offer requirements under the US Securities Exchange Act of 1934 (as amended) (the "Exchange Act"), or the securities laws of such other country, as the case may be, or: (ii) pursuant to an available exemption from such requirements. Neither the US Securities and Exchange Commission nor any US state securities commission has approved or disapproved the Offer, passed upon the merits or fairness of the Offer or passed comment upon the adequacy or completeness of this announcement or the Offer Document. Any representation to the contrary is a criminal offence in the United States.

To the extent permitted by applicable law, in accordance with, and to the extent permitted by, the Code and normal UK market practice and subject to Rule 14e-5(b) under the Exchange Act, Capita or its nominees or brokers (acting as agents) or their respective affiliates may from time to time make certain purchases of, or arrangements to purchase, shares or other securities in Xchanging, other than pursuant to the Offer, at any time prior to completion of the Offer becoming effective. These purchases may occur either in the open market at prevailing prices or in private transactions at negotiated prices. Any such purchases, or arrangements to purchase, will comply with all applicable UK rules, including the Code and the rules of the London Stock Exchange, to the extent applicable. No purchases will be made outside of the Offer in the United States by or on behalf of Capita. In addition, in accordance with, and to the extent permitted by, the Code and normal UK market practice, Citi and its affiliates will continue to act as exempt principal traders in Xchanging Shares on the London Stock Exchange and engage in certain other purchasing activities consistent with their respective normal and usual practice and applicable law. To the extent required by the applicable law (including the Code), any information about such purchases will be disclosed on a next day basis to the Panel on Takeovers and Mergers and a Regulatory Information Service including the Regulatory News Service on the London Stock Exchange website, www.londonstockexchange.com.

Forward-looking statements

This announcement contains certain statements which are, or may be deemed to be, "forward-looking statements". These statements are based on current expectations and projections about future events and are naturally subject to uncertainty and changes in circumstances. These forward-looking statements may include statements about the expected effects on Capita and/or Xchanging of the Offer, the expected timing and scope of the Offer, strategic options and all other statements in this announcement other than historical or current facts. Forward-looking statements often use words such as "anticipate", "target", "expect", "estimate", "intend", "plan", "budget", "schedule", "forecast", "project", "goal", "believe", "hope", "aims", "continue", "will", "may", "should", "would", "could", "subject to", or other words of similar meaning. By their nature, forward-looking statements involve known and unknown risks and uncertainties, because they relate to events and depend on circumstances that will occur in the future and the factors described in the context of such forward-looking statements in this announcement could cause actual results, outcomes and developments to differ materially from those expressed in, or implied by, such forward-looking statements and such statements are therefore qualified in their entirety by the risks and uncertainties surrounding these future expectations. Many of these risks and uncertainties relate to factors that are beyond the entities' ability to control or estimate precisely. Important factors that could cause actual results, performance or achievements of the Capita Group or the Xchanging Group to differ materially from the expectations of the Capita Group or the Xchanging Group, as applicable, include, among other things: UK domestic and global economic and business conditions; instability in the global financial markets, including Eurozone instability and the impact of any sovereign credit rating downgrade or other sovereign financial issues; market-related risks including in relation to interest rates and exchange rates; changing demographics and market-related trends; changes in customer preferences; changes to laws, regulation, accounting standards or taxation; the policies and actions of governmental or regulatory authorities in the UK or the European Union or other jurisdictions in which either the Capita Group or the Xchanging Group operates; the ability to attract and retain senior management and other employees; the extent of any future impairment charges or write-downs caused by depressed asset valuations, market disruptions and illiquid markets; the effects of competition and the actions of competitors; exposure to regulatory scrutiny, legal proceedings, regulatory investigations or complaints and other factors. Although it is believed that the expectations reflected in such forward-looking statements are reasonable, no member of the Capita Group or the Xchanging Group can give any assurance, representation or guarantee that such expectations will prove to have been correct and such forward-looking statements should be construed in light of such factors and you are therefore cautioned not to place reliance on these forward-looking statements which speak only as at the date of this announcement. Capita assumes no obligation to update or correct the information contained in this announcement (whether as a result of new information, future events or otherwise), except as required by applicable law or regulations.

No profit forecasts or estimates

No statement in this announcement is intended as a profit forecast or estimate for any period and no statement in this announcement should be interpreted to mean that earnings or earnings per share for Capita or Xchanging, as appropriate, for the current or future financial years would necessarily match or exceed the historical published earnings or earnings per share for Capita or Xchanging, as appropriate.

Disclosure requirements of the Code

Under Rule 8.3(a) of the Code, any person who is interested in 1 per cent. or more of any class of relevant securities of an offeree company or of any securities exchange offeror (being any offeror other than an offeror in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the offer period and, if later, following the announcement in which any securities exchange offeror is first identified. An Opening Position Disclosure must contain details of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no later than 3.30 pm (London time) on the 10th business day following the commencement of the Offer Period and, if appropriate, by no later than 3.30 pm (London time) on the 10th business day following the announcement in which any securities exchange offeror is first identified. Relevant persons who deal in the relevant securities of the offeree company or of a securities exchange offeror prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure.

Under Rule 8.3(b) of the Code, any person who is, or becomes, interested in 1 per cent. or more of any class of relevant securities of the offeree company or of any securities exchange offeror must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any securities exchange offeror. A Dealing Disclosure must contain details of the dealing concerned and of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s), save to the extent that these details have previously been disclosed under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 pm (London time) on the business day following the date of the relevant dealing.

If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of an offeree company or a securities exchange offeror, they will be deemed to be a single person for the purpose of Rule 8.3.

Opening Position Disclosures must also be made by the offeree company and by any offeror and Dealing Disclosures must also be made by the offeree company, by any offeror and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4).

Details of the offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Takeover Panel's website at www.thetakeoverpanel.org.uk, including details of the number of relevant securities in issue, when the offer period commenced and when any offeror was first identified. You should contact the Panel's Market Surveillance Unit on +44 (0)20 7638 0129 if you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure.

Information relating to Xchanging Shareholders

Please be aware that addresses, electronic addresses and certain other information provided by Xchanging Shareholders, persons with information rights and other relevant persons for the receipt of communications from Xchanging may be provided to Capita during the Offer Period as required under Section 4 of Appendix 4 to the Code.

Publication on website

A copy of this announcement will be available, subject to certain restrictions relating to persons resident in Restricted Jurisdictions, for inspection on Capita's website at http://investors.capita.co.uk/capita-offer-for-xchanging-plc.aspx and on Xchanging's website at www.xchanging.com by no later than 12 noon (London time) on 15 October 2015. For the avoidance of doubt, the contents of those websites are not incorporated, and do not form part of, this announcement.

You may request a hard copy of this announcement (any information incorporated by reference in this announcement) by contacting Xchanging's registrar, Equiniti Limited, at Aspect House, Spencer Road, Lancing, West Sussex, BN99 6DA, United Kingdom or on 0871 384 2030 (calls to this number cost 10 pence per minute plus your phone company's access charge, lines are open 8.30am to 5.30pm Monday to Friday) with an address to which the hard copy may be sent. If calling from outside the UK, use +44 121 415 7047. It is important that you note that unless you make such a request, a hard copy of this announcement and any such information incorporated by reference in it will not be sent to you. You may also request that all future documents, announcements and information to be sent to you in relation to the Offer should be in hard copy form.

Capita Share Issue

This announcement does not constitute an offer to sell, or a solicitation of offers to purchase or subscribe for, securities in the United States or any other jurisdiction. The securities to be issued in the Capita Share Issue (if effected) referred to herein have not been, and will not be, registered under the U.S. Securities Act, and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. There is no intention to register any portion of the Capita Share Issue (if effected) in the United States or to conduct a public offering of securities pursuant to the Capita Share Issue (if effected) in the United States. This announcement does not solicit money, securities or any other type of consideration in connection with the Capita Share Issue (if effected) and, if any money, securities or other type of consideration is sent in response hereto, it will not be accepted.

Rounding

Certain figures included in this announcement have been subjected to rounding adjustments. Accordingly, figures shown for the same category presented in different tables may vary slightly and figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that precede them.

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN OR INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION

FOR IMMEDIATE RELEASE

14 October 2015

RECOMMENDED FINAL CASH OFFER

for

XCHANGING PLC

by

CAPITA PLC

1. Introduction

The boards of directors of Capita plc ("Capita") and Xchanging plc ("Xchanging") are pleased to announce that they have reached agreement on the terms of a recommended final cash offer for Xchanging by Capita pursuant to which Capita will acquire the entire issued and to be issued share capital of Xchanging (the "Offer"). It is intended that the Offer be implemented by means of a takeover offer under the Code and within the meaning of Part 28 of the Companies Act 2006.

2. Summary of the Offer

Under the Offer, which will be subject to the Conditions and further terms set out in Appendix 1 to this announcement and to the further terms to be set out in the Offer Document, Xchanging Shareholders will receive:

for each Xchanging Share 160 pence per share in cash

The Offer values the entire issued and to be issued share capital of Xchanging at approximately £412 million.

The Offer represents a premium of approximately:

· 44 per cent. to the Closing Price of 111 pence per Xchanging Share on 2 October 2015, being the last Business Day prior to the commencement of the Offer Period;

· 52 per cent. to the average Closing Price of 105 pence per Xchanging Share for the three months ended on 2 October 2015, being the last Business Day prior to the commencement of the Offer Period; and

· 64 per cent. to the average Closing Price of 98 pence per Xchanging Share for the month ended on 2 October 2015, being the last Business Day prior to the commencement of the Offer Period.

The Offer is final and is not capable of being increased, save that Capita has reserved the right to increase the price per Xchanging Share payable pursuant to the terms of the Offer in the event that a third party announces a firm intention to make an offer for Xchanging pursuant to Rule 2.7 of the Code.

The Offer will require the launch of a tender offer for the free float of Xchanging Solutions Limited, a subsidiary of Xchanging with a dual listing on the NSE and BSE, and Capita intends to follow due process in relation to this tender offer.

3. Background to, and reasons for, the Offer

Capita has been successful in delivering on its strategy of actively developing capability and scale, both internally and through complementary acquisitions, and has created substantial value for its shareholders in recent years. In particular, through this approach, Capita has gained extensive experience and developed strong capabilities in integrating acquired businesses successfully and establishing a platform for growth.

The acquisition of Xchanging by Capita represents a continuation of this strategy that will build capability in existing operations, allow Capita to enter new attractive industry segments and enhance its future organic growth potential.

The Capita Board believes that the proposed acquisition represents a compelling opportunity for Capita, has a clear strategic rationale and substantial synergy potential, as well as generating shareholder value, in particular, through:

· positioning Capita as a leading provider of technology-enabled business process services ("BPS") in the attractive international insurance and asset administration industries;

· providing a stronger platform for Xchanging to accelerate sales growth and to develop its software, technology and procurement solutions under Capita's stewardship; and

· enabling Capita to secure at least £35 million in cost synergy benefits driven by head office, shared services and IT efficiencies in FY2017, at a cost of around £20 million in the first 12 months after acquisition.

The Offer is expected to be immediately earnings accretive for Capita and to deliver returns significantly in excess of Capita's cost of capital.

Capita's management team is familiar with Xchanging's business and is confident that Xchanging would integrate well with Capita's existing operations. In particular:

· Xchanging's strong position in the Lloyd's of London market and its expertise in general insurance and re-insurance, when combined with Capita's greater scale and capacity to deliver larger scale business processing services on a two to three year view, is expected to position the Enlarged Group strongly to unlock incremental value;

· Xchanging's European financial services businesses in Italy and Germany are complementary to Capita's Asset Services operations;

· under Capita's stewardship, the positioning of Xchanging's investment in Xuber and its acquisition of new, internationally transferable, insurance software products will be even stronger; and

· the combination of the strengths of Xchanging's procurement technical platform (MM4) and its data analytics capability (Spikes Cavell) with Capita's primarily consulting-led procurement offering should provide both companies' existing and new public and private sector clients with a stronger, comprehensive outsourced procurement solution.

No statement in this paragraph should be construed as a profit forecast or estimate or be interpreted to mean that the future earnings per share, profits, margins or cash flows of the Capita Group will necessarily be greater than historic published earnings per share, profits, margins or cash flows of the Capita Group.

4. Xchanging Directors' Recommendation

The Xchanging Directors, who have been so advised by Lazard as to the financial terms of the Offer, consider the terms of the Offer to be fair and reasonable. In providing its advice to the Xchanging Directors, Lazard has taken into account the commercial assessments of the Xchanging Directors. Lazard are providing independent financial advice to the Xchanging Directors for the purposes of Rule 3 of the Code.

In the absence of a higher offer, the Xchanging Directors intend unanimously to recommend that Xchanging Shareholders accept the Offer. If no higher competing offer from a third party is made by the PUSU Deadline, the Xchanging Directors who hold or are beneficially entitled to Xchanging Shares will accept the Offer in respect of their own beneficial holdings of Xchanging Shares amounting to, in aggregate, 1,155,683 Xchanging Shares representing approximately 0.47 per cent. of the issued ordinary share capital of Xchanging as at 13 October 2015, being the last Business Day prior to the date of this announcement.

Geoff Unwin has abstained from voting at the Xchanging Board in connection with advice to be given to Xchanging Shareholders in connection with the Offer, in light of his share matching arrangements with Xchanging.[4] 

5. Background to, and reasons for, the recommendation of the Xchanging Directors

The Xchanging Directors have evaluated the Offer on behalf of Xchanging Shareholders, as a whole. In evaluating the Offer, the Xchanging Directors have considered the interests of Xchanging's employees and customers, as well as the economic benefits to its shareholders.

The Xchanging Board has held discussions with Capita since early August 2015 regarding the terms of the potential acquisition of Xchanging by Capita. On 11 August 2015, Xchanging received a non-binding conditional proposal from Capita to acquire Xchanging at 140 pence per Xchanging Share in cash. The Xchanging Board reviewed the proposal, concluded that it significantly undervalued Xchanging's existing business and its prospects, and notified Capita that it would need to increase its price significantly. On 25 August 2015, Xchanging received a revised, non-binding conditional proposal from Capita to acquire Xchanging at 145 pence per Xchanging Share in cash, which the Xchanging Board concluded continued to significantly undervalue Xchanging's existing business and its prospects and notified Capita that it had unanimously rejected the revised proposal. On 17 September 2015, Xchanging received a further revised, non-binding conditional proposal from Capita to acquire Xchanging at 155 pence per Xchanging Share in cash. The Xchanging Board subsequently shared with Capita certain information on Xchanging's business plan. On 24 September 2015, Capita increased its proposal to a price of 160 pence in cash for each Xchanging Share. This proposal was expressed to be final and is not capable of being increased, save that Capita reserved the right to increase the price of the Offer if a third party announced a firm intention to make an offer for Xchanging.

As noted in the announcement by Xchanging on 4 October 2015, the Xchanging Group also received a non-binding conditional proposal from Apollo to acquire Xchanging at 170 pence per Xchanging Share in cash. The Xchanging Board has granted due diligence access to Apollo and that due diligence work is ongoing. Discussions have continued with Apollo but Apollo has not reached the stage at which it is prepared to announce a firm intention to make an offer under the Code which can be put before Xchanging Shareholders (and there can be no certainty Apollo will do so).

As a result of this announcement of Capita's firm intention to make an offer under Rule 2.7 of the Code, the previous deadline of 5:00 p.m. on 2 November, 2015, for Apollo to either announce a firm intention to make an offer or announce they do not intend to make an offer, will be replaced by the PUSU Deadline.

The Xchanging Board and management team have built a strong business, through a combined organic and inorganic growth strategy. The Xchanging Board believes Xchanging has a leading insurance software business and an enviable position in the insurance market, a stable capital markets business, and a growing applications services business. The Xchanging Board believes the market rating of the Xchanging Shares was at a significant discount to trading comparables prior to the announcement on 4 October 2015 of Capita's and Apollo's potential interest in making an offer for Xchanging. In Xchanging's half-year results announcement for the six months ended 30 June 2015 which was released on 30 July 2015, Xchanging stated: "Our BPS and Technology businesses have performed strongly in the first half of the year and the outlook is for this robust performance to continue in the second half of the year, although this is dependent on the timing of material Xuber contracts and currency effects. In Procurement, we have a clear strategic objective to address the profitability issues in the second half of the year. The outlook for the full year is a trading performance in line with last year and a return to growth in the full year 2016."

Xchanging's current trading remains in line with those statements. Xchanging continues to engage in positive discussions on a number of multi-year and material Xuber contracts and will provide a further update as and when appropriate. The 'Split and Fix' plans for Procurement are proceeding well.

The terms of the Offer represent a significant premium, in cash, of approximately 52 per cent. to the average Closing Price of 105 pence per Xchanging share for the three months ended 2 October 2015 (being the last Business Day prior to the date of Xchanging's announcement on 4 October 2015 that it was in discussions with Capita and Apollo); approximately 44 per cent. to the Closing Price per Xchanging Share of 111 pence on 2 October 2015; and approximately 64 per cent. to the average Closing Price of 98 pence per Xchanging Share for the one month period ended 2 October 2015.

The Xchanging Directors consider the Offer to be at a level that should be put to all Xchanging Shareholders for consideration and agreed to make this announcement with Capita to enable the terms and conditions of the Offer to be negotiated and to agree the framework within which the Offer could be made. Although the Xchanging Directors believe the Xchanging Group has a strong future as an independent business, the Offer premium places value on the Xchanging Group's prospects and provides certainty, in cash, to Xchanging Shareholders today as against the inherent uncertainty of the delivery of future value that exists in any business. Whilst greater value might be offered by the management team over time or by Apollo if it makes a higher offer, neither of these deliver certain value at this time.

The Xchanging Directors believe that Capita is a credible counterparty with a strong track-record of acquiring and integrating businesses. The Xchanging Directors believe that there is a strategic logic and potential business benefits to a combination of Xchanging and Capita.

6. Information on Capita

Capita is a leading UK provider of technology-enabled customer and business process services ("BPS") and integrated professional support services. With 68,000 people at over 400 sites, including 80 business centres across the UK, Europe, India and South Africa, Capita uses its expertise, infrastructure and scale benefits to transform its clients' services, driving down costs and adding value. Capita is quoted on the London Stock Exchange (CPI.L), and is a constituent of the FTSE 100 with 2014 revenue of £4.4 billion. Further information on Capita can be found at: www.capita.co.uk.

7. Information on Xchanging

Xchanging is a business technology and services provider. Xchanging uses innovation, technology and customer and market insight to provide differentiated solutions to its customers' operational and business processing challenges. Xchanging manages complex, large-scale back and middle office processes for its customers, providing an improved service at a lower cost than when these functions are performed internally. Xchanging's core business is the management of customers' business processes. Xchanging has offerings in three business areas: business process services, technology and procurement.

Business Process Services ("BPS")

The BPS business uses innovative technology to manage customers' complex back and middle office functions, including policy administration, claims administration, workers' compensation, broking administration and insurance products processes. The BPS business serves customers in many industry sectors, including Construction and Real Estate, Manufacturing, Retail and Distribution, Healthcare and the Public Sector, but the BPS business has particular domain strength in the P&C Insurance and Banking and Capital Markets sectors.

Technology

The Technology business provides insurance software, application services and technology infrastructure management services to a range of customers. Its Xuber insurance software products offer a comprehensive range of highly configurable and scalable modules, providing core processing for operators in the non-life commercial insurance market. Xchanging's application services business builds, tests and supports software applications for customers, many of whom are global leaders in their respective industries.

Procurement

The Procurement businesses manage customer spend through procurement management services, including strategic sourcing, category and spend management, spend analytics and e-procurement services. Each service offering is based around Xchanging's core technology platform, MM4, which is available via a stand-alone subscription or as part of four, technology-enabled procurement services: Procurement Outsourcing, Software-as-a-Service, Procurement-as-a-Service and Tail-end Spend Management.

In its annual results for the year ended 31 December 2014, Xchanging reported revenue of £573.5 million, gross profit of £69.3 million and a profit before tax of £51.1 million. On 30 July 2015, Xchanging reported its interim results for the six months ended 30 June 2015, with revenue of £240.2 million, gross profit of £27.6 million and a profit before tax of £17.1 million.

8. Management, employees and strategic plans for Xchanging

Capita has confirmed that, following completion of the Offer:

· it will procure that the relevant Xchanging Group employer entities of relevant Xchanging employees continue to comply with their respective liabilities to contribute to Xchanging's pension schemes in accordance with contracts of employment of relevant Xchanging employees, legislation and the trust deed and rules of the relevant schemes, where applicable;

· if Xchanging's UK defined benefit pension schemes are closed to new members, no further members will be admitted to active membership; and

· it will procure that, in relation to the UK defined benefit pension schemes, the relevant Xchanging Group employer entities will consult, if required, in accordance with applicable pensions and employment legislation with the current active members who are Xchanging employees as to the potential termination of their pension benefits.

Capita expects to provide a stronger platform for Xchanging to accelerate sales growth and to develop its software, technology and procurement solutions in its current markets of operation as well as additional markets.

However, the Capita Board recognises that, in order to achieve some of the expected benefits of the Acquisition, it will be necessary to perform a detailed review of how best to drive available cost synergies and integrate Xchanging into the Capita Group infrastructure. Capita intends to form an internal integration team to carry out this detailed review of Xchanging's operations. No firm decisions have been made by Capita in relation to that integration. Although there will be a focus on achieving synergies between the two organisations in terms of locations and shared services, until such review occurs, Capita cannot be certain what the impact will be on the employment of the management and employees of Xchanging, or the location of their places of business or any redeployment of fixed assets, although it is expected that this review may result in some reduction of headcount and rationalisation of locations.

The due diligence carried out to date by Capita has indicated the potential to generate significant cost savings in areas where there is an overlap of functions between Capita and Xchanging. Based on this initial analysis, Capita confirms that:

· For an initial period, Capita intends to manage all or the majority of Xchanging's operations within a standalone division, continuing to deliver all Xchanging services and products while undertaking a full review and implementing cost synergies from bringing Xchanging into the Capita structure.

· Capita is considering maintaining Xchanging's brands for a period.

· Areas of overlap in corporate, shared services and other operational functions have been identified. Capita intends to drive available cost synergies in these areas and anticipates that these efforts may result in a reduction of the Xchanging headcount. It is anticipated that any such reductions would be implemented within 24 months following completion of the Acquisition.

· Following completion of the Acquisition, Capita also intends to reduce costs which historically have been connected with Xchanging's status as a listed company.

Capita intends to enter into discussions with senior management of Xchanging in due course regarding their potential continuing involvement in the Enlarged Group. There are no agreements or arrangements between Capita and the senior management of Xchanging and, in particular, no discussions have taken place at this stage in relation to the terms of any management incentivisation agreements. The non-executive Xchanging Directors have confirmed that they intend to resign upon the Offer becoming, or being declared, wholly unconditional.

9. Current trading and prospects

Capita plc

On 29 July 2015, Capita announced its interim results for the six month period ended 30 June 2015, an extract of which is set out below:

"Overview

Capita is today reporting good financial results for the first half of 2015, underpinned by strong sales and operational performance.

Underlying revenue1 increased by 10% to £2,283m (H1 20142: £2,071m), including 3% organic growth3, net of attrition, and 7% acquisition growth. Underlying operating profit1 increased by 11% to £288.8m (H1 20142: £260.2m) and underlying profit before tax1 rose by 11% to £264.9m (H1 20142: £238.0m). Underlying earnings per share1 rose by 11% to 32.0p (H1 20142: 28.9p) and we increased our dividend for the half year by 9% to 10.5p per share (H1 2014: 9.6p).

The majority of our divisions performed well in the first half of 2015, with strong growth particularly in our Asset Services and Digital & Software Solutions divisions and a pleasing initial contribution from Capita Europe. Our Workplace Services, Customer Management and Local Government, Health & Property divisions also delivered good growth.

To date this year, we have secured 10 major contracts with an aggregate value of £1.6bn (H1 2014: £1.3bn), comprising 76% new business and 24% renewed contracts and representing a win rate of above 2 in 3 for the Group by value. These included contracts with Defra, NHS England and Central London Community Health NHS Trust (CLCH) and we were also approved by NHS England to join the Lead Provider Framework for Commissioning Support Services, all strategically significant contract wins and frameworks in the science and health sectors. The bid pipeline currently stands at £5.4bn (February 2015: £5.1bn), comprised of 30 bids with a weighted average contract length of 8 years, including 97% new business and 3% renewals and extensions.

We continued to make acquisitions in the first half of 2015 to build capability in existing markets, enter new markets and enhance our future organic growth potential. We invested a total of £279m, excluding deferred and contingent considerations, in acquiring 11 businesses in the period, including avocis, which provides a key platform for Capita Europe, and Vertex Mortgage Services, the completion of which is subject to approval by the Financial Conduct Authority.

Financial update

Revenue - the Group increased underlying revenue1 by 10% to £2,283m1 (H1 20142: £2,071m), comprising 3% organic growth3, net of attrition, and 7% from acquisitions. Organic growth was driven by the full benefit from last year's contract gains, such as the Defence Infrastructure Organisation (DIO) and Transport for London Congestion Charging, and good underlying performances from our Asset Services and Workplace Services divisions. As expected, revenue declined in the Insurance & Benefits Services division as a result of planned contract step downs which will end this year.

Operating profit - underlying operating profit1 increased by 11% to £288.8m1 (H1 20142: £260.2m). There were strong performances from Asset Services and Digital & Software Solutions divisions, the latter supported by acquisitions, and we were also pleased with the initial contribution from Capita Europe. Workplace Services, Customer Management, Local Government, Health & Property and IT Enterprise Services divisions all delivered good growth. Profits declined in the Insurance & Benefits Services division, as a result of the contract step downs, and the Integrated Services division, due to the residual impact of the Disclosure and Barring Service contract, which ended in March 2014.

Operating margin - underlying operating margin1 was 12.7% (H1 20142: 12.6%). We are confident that underlying Group operating margins will continue to be maintained in the range of 12.5% to 13.5% for the foreseeable future.

Profit before tax - underlying profit before tax1 increased by 11% to £264.9m (H1 20142: £238.0m). The underlying net interest charge4 was £24m (H1 2014: £22m).

Earnings per share - underlying earnings per share1 rose by 11% to 32.0p (H1 20142: 28.9p), after non-controlling interests of £4m (H1 2014: £4m). Our underlying tax rate was 18.5% (H1 2014: 18.5%).

Dividend - the Board has declared an interim dividend of 10.5p per ordinary share (H1 2014: 9.6p), representing an increase of 9%. The interim dividend will be payable on 30 November 2015 to shareholders on the register at the close of business on 23 October 2015.

Cash flow - cash generated by underlying operations1 was £300m (H1 20142: £ 291m), representing an underlying operating profit1 to cash conversion ratio of 104% (H1 20142: 112%). We continue to target a strong medium to long term annual cash conversion ratio at or around 100%. Underlying free cash flow1 was up 6% to £180m (H1 20142: £170m), supported by tight control of our capital expenditure which was 2.5% of revenue in the first half. There are currently no indications of significant capex increases in our business forecasts or bid pipeline.

Return on capital employed - our post-tax return on average capital employed1 (ROCE) was 14.5% (FY 20142: 14.8%), based upon the 12 month rolling position from our last reporting date to 30 June. There was a 37bps drag from the end of the Disclosure & Barring contract, the last of the planned contract step downs in the Insurance & Benefits division and exited activities. Our ROCE compares favourably to our estimated post-tax weighted average cost of capital (WACC) of 7.2%.

Debt profile - As at 30 June 2015, net debt was £1,685m (H1 2014: £1,424m). Following issuance of $293.5m and £97m private placement notes in H1 2015, we have a total of £1,401m outstanding private placement bond debt, of which £97m matures in September 2015, £141m in 2016 and the remainder at various maturities to 2027. In addition, we have £300m of long term bank loans, of which £200m is repayable in January 2017 and the remainder in 2019, and a £600m revolving credit facility maturing in August 2020, which was unutilised and fully available at 30 June 2015.

At 30 June 2015, our annualised net debt to EBITDA1 ratio was 2.4 (H1 20142: 2.3) with annualised interest cover1 at 14 times (H1 2014: 13 times). We expect to keep the ratio of net debt to EBITDA in the range of 2 to 2.5 over the long term and we would be unlikely to incur borrowings which would reduce underlying interest cover below 7 times.

Future prospects

Our good operational, sales and financial performance in the first half positions us well and we continue to expect to deliver low double digit revenue growth in 2015, with a slight increase in organic growth in the second half of the year, following the delayed start of some new contracts. We expect organic growth to accelerate in 2016, supported by the conversion of our bid pipeline.

Capita operates in a large addressable market with scope to increase penetration due to our own competitive advantages and a number of structural factors such as fiscal pressure, digitisation, regulation and changing demographics. With good growth in our existing markets, an increasing footprint in health and new platforms in science and Northern Europe, we are well placed to deliver a combination of sustainable growth, high levels of cash flow and strong return on capital over the medium term.

1 Excludes non-underlying items being: intangible amortisation, acquisition expenses, net contingent consideration movements, specific non-recurring items, non-cash impact of mark-to-market finance costs and businesses exited.

2 H1 2014 includes Occupational Health disposed in H2 2014.

3 Excludes the Occupational Health disposal in 2014 and the organic growth within the non-core health businesses exited in 2015.

4 Before the impact of the movement in valuation of mark-to-market financial instruments."

As reported for the six months to 30 June 2015, the majority of Capita's businesses continue to perform well and in line with expectations and the Capita Directors are pleased with the progress of Capita Europe. The Capita Directors continue to expect to deliver low double-digit revenue growth in 2015, supported by the start of new contracts in the second half.

Xchanging plc

On 30 July 2015, Xchanging announced its interim results for the six month period ended 30 June 2015, an extract of which is set out below:

"OVERVIEW

During the first half of the year our Business Process Services ('BPS') and Technology businesses (93.5% of 1H net revenue) performed well, in line with or ahead of our expectations. Our Procurement business (6.5% of 1H net revenue) however has delivered a very poor and disappointing performance which, combined with currency factors in our BPS business, has impacted our overall result for the half year.

Sector Review

BPS(67.2% of 1H net revenue)

Business Process Services has performed well. The transition out of legacy and lower margin business in our Broking and Claims businesses, a process that is now almost complete, reduced net revenue by £9.1 million. The weakening of the Euro and Australian dollar adversely impacted net revenue by £4.6 million. Despite these challenges, net revenue for this business amounted to £134.0 million (HY 2014: £142.1 million). Adjusted operating profit was £28.4 million (HY 2014: £26.1 million), representing an adjusted operating profit margin of 21.2% (HY 2014: 18.4%) largely reflecting the benefit of cost reduction initiatives taken last year.

BPS has continued to pursue the technology-enabled processing strategy and we are seeing encouraging signs from recent new offerings. Robotic Process Automation has been embedded in our operations and is now being taken to our customers as part of our enhanced service offering.

We have now combined our original Binder 360 offering with BinderCloud from the Total Objects acquisition at the end of 2014. The new offering, BinderCloud 360, sits at the heart of our new menu of Delegated Underwriting Services. Launched in 2014, the service has been well received in the market, winning a number of initial broker and carrier customers.

In Australia, the broker technology platform X-alt, in which we have a 90% interest, launched in April 2015. It is building a strong pipeline of new business, winning 6 new contracts in the first half of this year.

Following a successful Netsett pilot in an in-house corporate setting, the current pilot with members of the Ruschlikon group of broker and insurance companies is going well. Netsett, with the continued support of our partner Deutsche Bank, is gaining traction and is anticipated to generate its first revenues, albeit small, in the second half of the year.

We are working closely with Lloyd's of London to provide support for their Central Services Refresh Programme to achieve market modernisation. Within this, our current programme of new technology introductions, due to continue into 2016, is being well received. Our investment in the current year in developing this technology is key to ensuring that we remain at the centre of the London market.

The exit from the WorkCover workers' compensation contract with the State of New South Wales in Australia is now substantially complete.

In Financial Services, our investment in technology and restructuring is well advanced. The benefits are starting to show, although the reported numbers are being adversely impacted by the translation impact of the weak Euro against Sterling.

Technology(26.3% of 1H net revenue)

Technology has also performed well, despite the comparative effect of the exit from the London Metal Exchange ('LME') contract in May 2014, and the impact on adjusted operating profit of a higher amortisation charge of £5.1 million (HY 2014: £3.7 million). Net revenue was £52.4 million (HY 2014: £47.1 million). Adjusted operating profit was £4.1 million (HY 2014: £2.7 million), representing an adjusted operating profit margin of 7.8% (HY 2014: 5.7%).

The acquisition of the European insurance software businesses from Agencyport Software, announced on 4 July 2014, was finally cleared by the Competition and Markets Authority on 29 April 2015. The process not only delayed our ability to integrate the business, but also put a material burden on management resource as well as incurring costs.

However, this business meantime continued to perform in line with our expectations and the acquisition business plan, on a standalone basis. Following clearance, we are now integrating the acquisition into our Xuber insurance software business, so we can enjoy the full synergy, product offering and new market opportunity benefits envisaged at the time of the acquisition. In the second half we expect to start to realise the benefit of integration savings, which are anticipated to reach significant levels in 2016.

Similarly, the Total Objects acquisition, completed in December 2014, is contributing well in its first full half year and has been successfully building its customer base.

Our Xuber insurance software business continues to strengthen its profile in the market. Some key contracts were won in the first half, including with Ariel Re, with certain more material contracts in the pipeline progressing towards closure during the second half. A number of implementations including Everest Re are at an advanced stage of completion.

We remain confident about the potential of the Insurance Software business and the strength of the pipeline, although the length of the sales cycle, particularly for large policy administration replacement projects, means the timing of contract wins is not easy to predict.

In our Application Services business, the strong growth momentum continues with good flows of new business across the entire sector, and important new signings made in our Education business and in the Asian marketplace. We have won a significant number of new clients and substantially increased our portfolio of work with our existing customers.

Given the materiality of contracts in the Xuber pipeline, some of which are based on initial licence revenues in-year, the timing of wins will be an important factor in Xchanging's financial performance for the year as a whole.

Procurement(6.5% of 1H net revenue)

As foreshadowed in our First Quarter 2015 Update published in April, Procurement has had a difficult first half year. A weak performance in the traditional outsourcing business has combined with underperformance in one of the new Tail-end Spend Management contracts, overshadowing the HY on HY revenue growth of the acquired technology businesses to deliver an overall unsatisfactory result. Net revenue was £13.0 million (HY 2014: £15.9 million), and the adjusted operating loss was £6.8 million (HY 2014: £1.7 million loss). This was after allocating central overheads of £1.8 million (HY 2014: £1.9 million). This has resulted in an impairment of the Procurement sector goodwill of £47.0 million and an onerous contract and related assets exceptional charge of £4.1 million. In the 2H we expect a further exceptional charge for restructuring of c.£3 million.

Our Procurement business is comprised of three principal operations: our technology platform offerings comprising the MM4 and Spikes Cavell (acquired in February 2015) spend analytics businesses; our traditional outsourcing contracts; and our Tail-end Spend Management contracts.

Technology platform offerings: revenues from our technology platform offerings, Software-as-a-Service ('SaaS') and Procurement-as-a-Service ('PaaS') based on the MM4 technology, continue to grow from a small base. Spikes Cavell, acquired in February 2015 to build out the range of offerings, is performing to plan and has secured some key contract renewals. The technology business has grown revenues with net additions to the customer base, mainly in the attractive US market.

Traditional outsourcing: in our First Quarter 2015 Update we noted that the performance of the Procurement business overall was being adversely impacted by our traditional outsourcing business where cost base reduction has been lagging the rate of loss of traditional revenues, impacted by contract exits and contract renegotiations. These circumstances have persisted throughout the first half.

Tail-end Spend Management: in the First Quarter 2015 Update we also noted that the first half of 2015 would bear the costs of the implementation process for the new, Tail-end Spend Management business won in the second half of 2014, with benefits expected to start showing in the second half of the year. Whilst the costs of implementation have been borne in the first half as expected, the associated stream of new revenue has been slow to gain momentum and is significantly lagging our expectations. The future of this contract is now under active review and it has been accounted for as an onerous contract in our half year accounts.

The combined effect of the traditional outsourcing and Tail-end Spend Management businesses has significantly impacted the Procurement business result overall.

In our First Quarter 2015 Update we commented that a recovery plan was underway to address the challenges facing the Procurement business, and in the first half, significant work has been undertaken to manage the cost base. However, despite revenue growth in the, as yet small, technology platform business, anticipated new contracts in the second quarter did not materialise, resulting in a deterioration of the financial year forecast for Procurement overall. 

We have undertaken a review of options for how best to manage this business profitably. Our decision is to align the principal parts with other segments of the Group. This is designed to facilitate the potential for a material reduction in the cost base of the business across the second half of the year and to enable us to manage the business profitably. As firm proposals for cost reductions are formulated they will be subject to local legislation on employee consultation in all potentially affected countries.

The technology platform-based SaaS/PaaS business will be included within our Technology business and come under that sector's leadership. We will continue to go to market actively and support these offerings, as part of our expanding technology range.

Our outsourcing contracts, being in the nature of business process outsourcing business, will now be operated and delivered by our BPS business, and come under that sector's leadership. We anticipate being able to utilise our existing BPS infrastructure to achieve significant cost reductions during the second half of 2015. The procurement outsourcing business will continue with the existing customers and will be an offering as an upsell to the technology customer relationships. The capability to deliver the contracts will be retained within BPS and we will also further examine options for improving the efficiency of this business through the greater use of robotics and offshoring.

One of the Tail-end Spend Management contracts won in 2014 has proved disappointing, incurring unacceptable losses to date. We are actively reviewing the contract with the customer to establish a resolution. In the meantime, the contract will be managed and delivered by BPS, alongside the traditional outsourcing contracts.

To help plan to achieve maximum benefit from the strategic realignment in the second half of the year, we have enlisted external support. We will continue to report financial information for the Procurement businesses in the near term but ultimately the technology and business processing components of Procurement will be reported within Technology and BPS.

OUTLOOK

There is no doubt that the significant part of Xchanging's business is benefitting from the actions and investments of recent years and growing robustly in attractive markets. The significant and unwelcome underperformance of Procurement, which accounts for a small part of our overall business, should not obscure the strong growth and future potential of the Group, nor the fact of the significant transformation the Company has undergone over the last four years. Xchanging now has a leading insurance software business and an enviable position in the insurance market; a stable capital markets business; and a growing Applications Services business.

As described above, our BPS and Technology businesses have performed strongly in the first half of the year and the outlook is for this robust performance to continue in the second half of the year, although this is dependent on the timing of material Xuber contracts, and currency effects. In Procurement, we have a clear strategic objective to address the profitability issues, in the second half of the year. Our success in achieving this will also affect our full year financial performance.

Our efforts in the second half will be focussed on converting our established and growing pipeline. It will also be focused on achieving a satisfactory result from the reorganisation of the way in which we manage and operate our procurement business within BPS and Technology by aligning our outsourcing contracts with our BPS business and using our Technology business to accelerate our procurement technology offerings. The outlook for the full year is for a trading performance in line with last year and a return to growth in the full year 2016."

Since 30 June 2015, Xchanging has continued to trade materially in line with expectations.

10. Financing of the Offer

Full acceptance of the Offer will result in the payment by Capita of approximately £412 million in cash to Xchanging Shareholders (and participants in the Xchanging Share Schemes). The cash consideration payable to Xchanging Shareholders will be satisfied through debt and/or the proceeds of the Capita Share Issue (if effected). The Offer is not conditional on the Capita Share Issue.

Capita and certain of its affiliates have entered into a sterling unsecured bridging term loan facility agreement with Citibank, N.A., London Branch and Deutsche Bank Luxembourg S.A. (as lenders) and Citibank International Limited acting as agent dated 13 October 2015 (the "Bridge Facility Agreement") under which a £450 million credit facility is available to Capita to finance the cash consideration payable pursuant to the Offer. Capita intends to effect the Capita Share Issue, in which case the proceeds will be utilised to refinance the credit facility made available under the Bridge Facility Agreement to the extent drawn at that time. Further details of the Bridge Facility Agreement and financing arrangements will be included in the Offer Document.

Citi, as financial adviser to Capita, is satisfied that sufficient cash resources are available to Capita to satisfy the cash consideration payable to Xchanging Shareholders (and participants in the Xchanging Share Schemes) in the event of full acceptance of the Offer.

11. Structure of the Offer

11.1 Terms and conditions

The Offer is conditional upon, amongst other things: (i) valid acceptances being received in respect of Xchanging Shares which, together with any Xchanging Shares acquired by Capita (whether pursuant to the Offer or otherwise) constitute not less than 90 per cent. in nominal value of the Xchanging Shares to which the Offer relates and represent not less than 90 per cent. of the voting rights attached to such Xchanging Shares; (ii) the FCA having notified Capita and/or Xchanging of its approval of the change of control of any UK authorised persons within the Xchanging Group as a result of the Acquisition (or the requisite waiting period for such approval to be provided having elapsed without the FCA having objected to the Acquisition); (iii) BaFin having notified Capita and/or Xchanging that it has no objections to the proposed acquisition of a substantial holding in a German institution supervised under the KWG in the Wider Xchanging Group by Capita (or the requisite waiting period for such approval to be provided having elapsed without the BaFin having objected to the proposed acquisition of such substantial holding);(iv) in so far as the Offer is required to be notified under the US merger control regime, all necessary notifications and filings having been made and all applicable waiting periods (including any extensions thereof) under the United States Hart-Scott-Rodino Antitrust Improvements Act of 1976 (as amended) having expired, lapsed or been terminated without a request for additional information having been made by the FTC or the Antitrust Division of the Department of Justice; and (v) in so far as the Offer is required to be notified under the German merger control regime, the German Bundeskartellamt deciding that the prohibition criteria in German Act against Restraints of Competition are not satisfied, or being deemed to have made such a decision. Appendix 1 to this announcement sets out the Conditions and further terms to which the Offer will be subject, including details of requisite regulatory and merger control approvals. The Offer does not require the approval of Capita shareholders.

The Offer can only become effective if all Conditions to the Offer have been satisfied or, where applicable, waived. Subject to the satisfaction or, where applicable, waiver of the Conditions, it is expected that completion of the Acquisition will occur at or around the end of 2015/early 2016 following the receipt of relevant merger control clearances and regulatory approvals.

11.2 Takeover offer

It is intended that the Offer be implemented by means of a takeover offer under the Code. Capita reserves the right, subject to the consent of the Panel, to effect the Offer by way of a Court-sanctioned scheme of arrangement under Part 26 of the UK Companies Act.

11.3 Publication of Offer Document

It is expected that the Offer Document will be posted to Xchanging Shareholders as soon as reasonably practicable and, in any event, by 11 November 2015.

11.4 Compulsory acquisition, de-listing and cancellation of trading

If the Offer becomes, or is declared, wholly unconditional and Capita receives acceptances under the Offer in respect of, and/or otherwise acquires, not less than 90 per cent. of the Xchanging Shares by nominal value and voting rights attaching to such shares to which the Offer relates, Capita intends to apply the provisions of sections 974 to 991 (inclusive) of the Companies Act 2006 to acquire compulsorily any outstanding Xchanging Shares to which the Offer relates not acquired, or agreed to be acquired, pursuant to the Offer or otherwise.

After the Offer becomes, or is declared, unconditional in all respects and if Capita has: (i) by virtue of its shareholdings and acceptances of the Offer acquired, or agreed to acquire, Xchanging Shares representing at least 75 per cent. of the voting rights of Xchanging; and (ii) Capita has obtained acceptances of the Offer or acquired, or agreed to acquire, Xchanging Shares from Xchanging Shareholders that represent a majority of the voting rights held by the Xchanging Shareholders on the date of this announcement (the "Delisting Threshold"), Capita intends to procure the making of an application by Xchanging for cancellation, respectively, of the trading in Xchanging Shares on the London Stock Exchange's main market for listed securities and of the listing of Xchanging Shares on the premium listing segment of the Official List. A notice period of not less than 20 Business Days before the cancellation will commence on the date on which the Offer becomes, or is declared, unconditional in all respects provided that Capita has attained the Delisting Threshold. Delisting would significantly reduce the liquidity and marketability of any Xchanging Shares not assented to the Offer.

It is also proposed that Xchanging will be re-registered as a private company in due course.

12. Disclosure of interests in Xchanging Shares

As at the close of business on 13 October 2015, being the latest practicable date before this announcement, Capita did not hold any Xchanging Shares.

13. Offer-related arrangements

Confidentiality agreement

Capita and Xchanging entered into a confidentiality agreement on 23 September 2015 (the "Confidentiality Agreement") pursuant to which Capita has undertaken to keep certain information relating to: (i) the Acquisition; and (ii) the Xchanging Group and its businesses, customers or financial affairs confidential and not to disclose such information to third parties, except (a) to its directors, senior employees, advisers and, in certain circumstances, certain other permitted recipients (such as providers or potential providers of debt or equity finance) for the purposes of evaluating the Acquisition and the Offer or (b) if required to do so by law or regulation or by any regulatory or governmental authority to which it is subject.

Pursuant to the Confidentiality Agreement, Capita undertook, for a period of 12 months from the date of the Confidentiality Agreement, not to have any contact in relation to the Acquisition with any of Xchanging's shareholders (save for specified institutional shareholders), directors, employees, customers, contractors or sub-contractors without Xchanging's prior written consent and not to solicit, engage or employ or offer to employ any director, officer or senior employee of Xchanging, save in certain circumstances.

Capita further agreed to a standstill in relation to the securities of Xchanging for a period of 12 months from the date of the Confidentiality Agreement that applies other than, inter alia, in connection with the announcement of a recommended offer.

Save as referred to above, the obligations pursuant to the Confidentiality Agreement will remain in force until completion of the Offer or, if the Offer fails to complete, for a period of two years from the date of the Confidentiality Agreement.

Co-operation agreement

Capita and Xchanging entered into a co-operation agreement on 14 October 2015 (the "Co-operation Agreement") pursuant to which, among other things: (i) Capita and Xchanging have agreed to co-operate with each other, and provide each other with such reasonable information and assistance, for the purposes of obtaining the CMA Merger Clearance, any other Clearances required and satisfying the Merger Control Conditions and Regulatory Conditions; and (ii) without prejudice to its rights in connection with any other condition to the Offer, Capita has agreed to seek the Panel's consent to an extension of the Code timetable at the relevant time in the event that it becomes apparent that any of the Merger Control Conditions or Regulatory Conditions are likely not to be satisfied within the normal Code timetable.

Reverse break fee agreement

Capita and Xchanging entered into a reverse break fee agreement on 14 October 2015 (the "Reverse Break Fee Agreement") pursuant to which, among other things, by way of compensation for any loss suffered by Xchanging in connection with the preparation and negotiation of the Offer, Capita has agreed to pay a break fee (the "Break Fee") to Xchanging in the amount of £4 million where:

(a) on or before 28 February 2016, any Merger Control Condition or Regulatory Condition to the Offer shall not have been satisfied or waived by Capita and either: (i) the Panel has not consented to an extension of the Offer pursuant to Rule 31.6 or Rule 31.7 of the Code, as applicable, and the Offer has lapsed as a result; or (ii) Capita invokes such Merger Control Condition or Regulatory Condition in order to lapse the Offer; or

(b) the Offer becomes subject to a CMA Phase 2 Reference prior to the Offer becoming, or being declared, unconditional as to acceptances,

(each a "Break Fee Event").

However, the Break Fee will not be payable in circumstances where:

(a) a Break Fee Event is caused by Xchanging materially breaching certain of its obligations under the Co-operation Agreement;

(b) Xchanging has provided Capita with materially incorrect or misleading information on which it has based (i) any submission, notification or communication with any relevant Regulatory Authority or (ii) any decision that no such submission, notification or communication is required and which, in both cases has caused the relevant Merger Control Condition or Regulatory Condition not to be satisfied or a CMA Phase 2 Reference to be made; or

(c) Apollo or another third party announces a firm intention to make an offer for Xchanging (a "Competing Offer") and such Competing Offer is successful, notwithstanding that the Offer may have lapsed or been withdrawn.

14. Xchanging Share Schemes

The Offer extends to any Xchanging Shares which are unconditionally allotted or issued fully paid (or credited as fully paid) while the Offer remains open for acceptance, including any such shares unconditionally allotted or issued pursuant to the exercise of options and/or awards under the Xchanging Share Schemes. Appropriate proposals will be made to participants in the Xchanging Share Schemes and such persons will be sent separate letters in due course explaining the effect of the Offer on their options/awards and setting out the proposals being made in respect of their outstanding options/awards in connection with the Offer.

15. Documents available on websites

Copies of the following documents will published by no later than 12 noon (London time) on the Business Day following the date of this announcement on Capita's website at http://investors.capita.co.uk/capita-offer-for-xchanging-plc.aspx and on Xchanging's website at www.xchanging.com and will be made available until the end of the Offer Period:

· a copy of this announcement;

· the Confidentiality Agreement;

· the Reverse Break Fee Agreement;

· the Co-operation Agreement; and

· the Bridge Facility Agreement.

16. General

This announcement does not constitute an offer or an invitation to purchase or subscribe for any securities.

Your attention is drawn to the further information contained in the Appendices which form part of, and should be read in conjunction with, this announcement.

The Offer will be subject to the Conditions and further terms set out in Appendix 1 to this announcement and to the full terms and conditions which will be set out in the Offer Document. Appendix 2 contains the bases and sources of certain information used in this summary and this announcement. Appendix 3 contains definitions of certain terms used in this announcement.

Enquiries:

 Important notices relating to financial advisers and corporate brokers

Citigroup Global Markets Limited ("Citi"), which is authorised by the Prudential Regulation Authority and regulated in the United Kingdom by the Financial Conduct Authority and the Prudential Regulation Authority, is acting exclusively for Capita and no one else in connection with the Offer and will not be responsible to anyone other than Capita for providing the protections afforded to clients of Citi nor for providing advice in relation to the Offer or any other matters referred to in this announcement. Neither Citi nor any of its affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Citi in connection with this announcement, any statement contained herein, the Offer or otherwise.

Deutsche Bank AG is authorised under German Banking Law (competent authority: European Central Bank) and, in the United Kingdom, by the Prudential Regulation Authority. It is subject to supervision by the European Central Bank and by BaFin, Germany's Federal Financial Supervisory Authority, and is subject to limited regulation in the United Kingdom by the Prudential Regulation Authority and Financial Conduct Authority.

Deutsche Bank AG is a joint stock corporation with limited liability incorporated in the Federal Republic of Germany, Local Court of Frankfurt am Main, HRB No. 30 000; Branch Registration in England and Wales BR000005 and Registered Address: Winchester House, 1 Great Winchester Street, London EC2N 2DB. Deutsche Bank AG, London Branch is a member of the London Stock Exchange. (Details about the extent of our authorisation and regulation by the Prudential Regulation Authority, and regulation by the Financial Conduct Authority are available on request or from www.db.com/en/content/eu_disclosures.htm.).

Deutsche Bank AG, acting through its London branch ("Deutsche Bank"), is acting as a corporate broker to Capita and no other person in connection with the Offer, this announcement and its contents. Deutsche Bank will not be responsible to any person other than Capita for providing any of the protections afforded to clients of Deutsche Bank, nor for providing any advice in relation to any matter referred to herein. Without limiting a person's liability for fraud, neither Deutsche Bank nor any of its subsidiary undertakings, branches or affiliates nor any of its or their respective directors, officers, representatives, employees, advisers or agents owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Deutsche Bank in connection with this announcement, any statement contained herein or otherwise.

Lazard & Co., Limited ("Lazard"), which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting exclusively for Xchanging and no one else in connection with the Offer and will not be responsible to anyone other than Xchanging for providing the protections afforded to clients of Lazard nor for providing advice in relation to the Offer or any other matters referred to in this announcement. Neither Lazard nor any of its affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Lazard in connection with this announcement, any statement contained herein, the Offer or otherwise.

Investec Bank plc, which is authorised in the United Kingdom by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority, is acting exclusively for Xchanging and no-one else in connection with the Offer and will not be responsible to anyone other than Xchanging for providing the protections afforded to its clients or for providing advice in connection with the Offer or any other matters referred to in this announcement.

Liberum Capital Limited, which is authorised and regulated by the Financial Conduct Authority in the United Kingdom, is acting exclusively for Xchanging and for no one else in connection with the Offer and will not be responsible to anyone other than Xchanging for providing the protections afforded to its clients or for providing advice in connection with the Offer or any other matters referred to in this announcement.

Further information

This announcement is not intended to, and does not, constitute or form part of any offer, invitation or the solicitation of an offer to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of any securities, or the solicitation of any vote or approval in any jurisdiction, pursuant to the Offer or otherwise. The Offer will be made solely by means of the Offer Document and the Form of Acceptance accompanying the Offer Document, which will contain the full terms and conditions of the Offer, including details of how the Offer may be accepted. Any response to the Offer should be made only on the basis of information contained in the Offer Document. Xchanging Shareholders are advised to read the formal documentation in relation to the Offer carefully once it has been despatched.

This announcement has been prepared for the purposes of complying with English law, the rules of the London Stock Exchange and the Code and the information disclosed may not be the same as that which would have been disclosed if this announcement had been prepared in accordance with the laws and regulations of any jurisdiction outside the United Kingdom.

Overseas jurisdictions

The distribution of this announcement in jurisdictions other than the United Kingdom and the ability of Xchanging Shareholders who are not resident in the United Kingdom to participate in the Offer may be affected by the laws of relevant jurisdictions. Therefore any persons who are subject to the laws of any jurisdiction other than the United Kingdom or Xchanging Shareholders who are not resident in the United Kingdom will need to inform themselves about, and observe, any applicable legal or regulatory requirements. Any failure to comply with the applicable restrictions may constitute a violation of the securities laws of any such jurisdiction. Further details in relation to overseas shareholders will be contained in the Offer Document.

The Offer is not being, and will not be, made available, directly or indirectly, in or into or by the use of the mails of, or by any other means or instrumentality of interstate or foreign commerce of, or any facility of a national state or other securities exchange of any Restricted Jurisdiction, unless conducted pursuant to an exemption from the applicable securities laws of such Restricted Jurisdiction.

Accordingly, copies of this announcement and all documents relating to the Offer are not being, and must not be, directly or indirectly, mailed, transmitted or otherwise forwarded, distributed or sent in, into or from any Restricted Jurisdiction except pursuant to an exemption from the applicable securities laws of such Restricted Jurisdiction and persons receiving this announcement (including, without limitation, agents, nominees, custodians and trustees) must not distribute, send or mail it in, into or from such jurisdiction. Any person (including, without limitation, any agent, nominee, custodian or trustee) who has a contractual or legal obligation, or may otherwise intend, to forward this announcement and/or the Offer Document and/or any other related document to a jurisdiction outside the United Kingdom should inform themselves of, and observe, any applicable legal or regulatory requirements of their jurisdiction.

Notice to US holders of Xchanging Shares

The Offer, if required to be made, will be made in the United States pursuant to applicable exemptions under the US tender offer rules and securities laws and otherwise in accordance with the requirements of the Code, the Panel and the London Stock Exchange. Accordingly, the Offer will be subject to disclosure and other procedural requirements, including with respect to withdrawal rights, offer timetable, settlement procedures and timing of payments that are different from those applicable under US domestic tender offer procedures and law.

The Offer is being made for the securities of an English company with a listing on the London Stock Exchange. The Offer is subject to UK disclosure requirements, which are different from certain United States disclosure requirements. The financial information on both Capita and Xchanging included in this announcement has been prepared in accordance with IFRS, thus neither may be comparable to financial information of US companies or companies whose financial statements are prepared in accordance with generally accepted accounting principles in the United States.

The receipt of cash pursuant to the Offer by a US holder of Xchanging Shares may be a taxable transaction for US federal income tax purposes and under applicable US state and local, as well as foreign and other, tax laws. Each Xchanging Shareholder is urged to consult his independent professional adviser immediately regarding the tax consequences of accepting the Offer. Furthermore, the payment and settlement procedure with respect to the Offer will comply with the relevant United Kingdom rules, which differ from the United States payment and settlement procedures, particularly with regard to the date of payment of consideration.

The Offer will be made in the United States by Capita and no one else.

It may be difficult for US holders of Xchanging Shares to enforce their rights and any claim arising out of US federal securities laws, since Capita is incorporated under the laws of England and Wales and Xchanging is incorporated under the laws of England and Wales and some or all of their officers and directors are residents of non-US jurisdictions. In addition, most of the assets of Capita and Xchanging are located outside the United States. US holders of Xchanging Shares may not be able to sue a non-US company or its officers or directors in a non-US court for violations of US securities laws.

Further, it may be difficult to compel a non-US company and its affiliates to subject themselves to a US court's judgment.

This announcement does not constitute an offer of securities for sale in the United States or an offer to acquire or exchange securities in the United States. No offer to acquire securities or to exchange securities for other securities has been made, or will be made, directly or indirectly, in or into, or by the use of the mails of, or by any means or instrumentality of interstate or foreign commerce or any facilities of a national securities exchange of, the United States or any other country in which such offer may not be made other than: (i) in accordance with the tender offer requirements under the US Securities Exchange Act of 1934 (as amended) (the "Exchange Act"), or the securities laws of such other country, as the case may be, or: (ii) pursuant to an available exemption from such requirements. Neither the US Securities and Exchange Commission nor any US state securities commission has approved or disapproved the Offer, passed upon the merits or fairness of the Offer or passed comment upon the adequacy or completeness of this announcement or the Offer Document. Any representation to the contrary is a criminal offence in the United States.

To the extent permitted by applicable law, in accordance with, and to the extent permitted by, the Code and normal UK market practice and subject to Rule 14e-5(b) under the Exchange Act, Capita or its nominees or brokers (acting as agents) or their respective affiliates may from time to time make certain purchases of, or arrangements to purchase, shares or other securities in Xchanging, other than pursuant to the Offer, at any time prior to completion of the Offer becoming effective. These purchases may occur either in the open market at prevailing prices or in private transactions at negotiated prices. Any such purchases, or arrangements to purchase, will comply with all applicable UK rules, including the Code and the rules of the London Stock Exchange, to the extent applicable. No purchases will be made outside of the Offer in the United States by or on behalf of Capita. In addition, in accordance with, and to the extent permitted by, the Code and normal UK market practice, Citi and its affiliates will continue to act as exempt principal traders in Xchanging Shares on the London Stock Exchange and engage in certain other purchasing activities consistent with their respective normal and usual practice and applicable law. To the extent required by the applicable law (including the Code), any information about such purchases will be disclosed on a next day basis to the Panel on Takeovers and Mergers and a Regulatory Information Service including the Regulatory News Service on the London Stock Exchange website, www.londonstockexchange.com.

Forward-looking statements

This announcement contains certain statements which are, or may be deemed to be, "forward-looking statements". These statements are based on current expectations and projections about future events and are naturally subject to uncertainty and changes in circumstances. These forward-looking statements may include statements about the expected effects on Capita and/or Xchanging of the Offer, the expected timing and scope of the Offer, strategic options and all other statements in this announcement other than historical or current facts. Forward-looking statements often use words such as "anticipate", "target", "expect", "estimate", "intend", "plan", "budget", "schedule", "forecast", "project", "goal", "believe", "hope", "aims", "continue", "will", "may", "should", "would", "could", "subject to", or other words of similar meaning. By their nature, forward-looking statements involve known and unknown risks and uncertainties, because they relate to events and depend on circumstances that will occur in the future and the factors described in the context of such forward-looking statements in this announcement could cause actual results, outcomes and developments to differ materially from those expressed in, or implied by, such forward-looking statements and such statements are therefore qualified in their entirety by the risks and uncertainties surrounding these future expectations. Many of these risks and uncertainties relate to factors that are beyond the entities' ability to control or estimate precisely. Important factors that could cause actual results, performance or achievements of the Capita Group or the Xchanging Group to differ materially from the expectations of the Capita Group or the Xchanging Group, as applicable, include, among other things: UK domestic and global economic and business conditions; instability in the global financial markets, including Eurozone instability and the impact of any sovereign credit rating downgrade or other sovereign financial issues; market-related risks including in relation to interest rates and exchange rates; changing demographics and market-related trends; changes in customer preferences; changes to laws, regulation, accounting standards or taxation; the policies and actions of governmental or regulatory authorities in the UK or the European Union or other jurisdictions in which either the Capita Group or the Xchanging Group operates; the ability to attract and retain senior management and other employees; the extent of any future impairment charges or write-downs caused by depressed asset valuations, market disruptions and illiquid markets; the effects of competition and the actions of competitors; exposure to regulatory scrutiny, legal proceedings, regulatory investigations or complaints and other factors. Although it is believed that the expectations reflected in such forward-looking statements are reasonable, no member of the Capita Group or the Xchanging Group can give any assurance, representation or guarantee that such expectations will prove to have been correct and such forward-looking statements should be construed in light of such factors and you are therefore cautioned not to place reliance on these forward-looking statements which speak only as at the date of this announcement. Capita assumes no obligation to update or correct the information contained in this announcement (whether as a result of new information, future events or otherwise), except as required by applicable law or regulations.

No profit forecasts or estimates

No statement in this announcement is intended as a profit forecast or estimate for any period and no statement in this announcement should be interpreted to mean that earnings or earnings per share for Capita or Xchanging, as appropriate, for the current or future financial years would necessarily match or exceed the historical published earnings or earnings per share for Capita or Xchanging, as appropriate.

Disclosure requirements of the Code

Under Rule 8.3(a) of the Code, any person who is interested in 1 per cent. or more of any class of relevant securities of an offeree company or of any securities exchange offeror (being any offeror other than an offeror in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the offer period and, if later, following the announcement in which any securities exchange offeror is first identified. An Opening Position Disclosure must contain details of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no later than 3.30 pm (London time) on the 10th business day following the commencement of the Offer Period and, if appropriate, by no later than 3.30 pm (London time) on the 10th business day following the announcement in which any securities exchange offeror is first identified. Relevant persons who deal in the relevant securities of the offeree company or of a securities exchange offeror prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure.

Under Rule 8.3(b) of the Code, any person who is, or becomes, interested in 1 per cent. or more of any class of relevant securities of the offeree company or of any securities exchange offeror must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any securities exchange offeror. A Dealing Disclosure must contain details of the dealing concerned and of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s), save to the extent that these details have previously been disclosed under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 pm (London time) on the business day following the date of the relevant dealing.

If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of an offeree company or a securities exchange offeror, they will be deemed to be a single person for the purpose of Rule 8.3.

Opening Position Disclosures must also be made by the offeree company and by any offeror and Dealing Disclosures must also be made by the offeree company, by any offeror and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4).

Details of the offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Takeover Panel's website at www.thetakeoverpanel.org.uk, including details of the number of relevant securities in issue, when the offer period commenced and when any offeror was first identified. You should contact the Panel's Market Surveillance Unit on +44 (0)20 7638 0129 if you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure.

Information relating to Xchanging Shareholders

Please be aware that addresses, electronic addresses and certain other information provided by Xchanging Shareholders, persons with information rights and other relevant persons for the receipt of communications from Xchanging may be provided to Capita during the Offer Period as required under Section 4 of Appendix 4 to the Code.

Publication on website

A copy of this announcement will be available, subject to certain restrictions relating to persons resident in Restricted Jurisdictions, for inspection on Capita's website at http://investors.capita.co.uk/capita-offer-for-xchanging-plc.aspx and on Xchanging's website at www.xchanging.com by no later than 12 noon (London time) on 15 October 2015. For the avoidance of doubt, the contents of those websites are not incorporated, and do not form part of, this announcement.

You may request a hard copy of this announcement (any information incorporated by reference in this announcement) by contacting Xchanging's registrar, Equiniti Limited, at Aspect House, Spencer Road, Lancing, West Sussex, BN99 6DA, United Kingdom or on 0871 384 2030 (calls to this number cost 10 pence per minute plus your phone company's access charge, lines are open 8.30am to 5.30pm Monday to Friday) with an address to which the hard copy may be sent. If calling from outside the UK, use +44 121 415 7047. It is important that you note that unless you make such a request, a hard copy of this announcement and any such information incorporated by reference in it will not be sent to you. You may also request that all future documents, announcements and information to be sent to you in relation to the Offer should be in hard copy form.

Capita Share Issue

This announcement does not constitute an offer to sell, or a solicitation of offers to purchase or subscribe for, securities in the United States or any other jurisdiction. The securities to be issued in the Capita Share Issue (if effected) referred to herein have not been, and will not be, registered under the U.S. Securities Act, and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. There is no intention to register any portion of the Capita Share Issue (if effected) in the United States or to conduct a public offering of securities pursuant to the Capita Share Issue (if effected) in the United States. This announcement does not solicit money, securities or any other type of consideration in connection with the Capita Share Issue (if effected) and, if any money, securities or other type of consideration is sent in response hereto, it will not be accepted.

Rounding

Certain figures included in this announcement have been subjected to rounding adjustments. Accordingly, figures shown for the same category presented in different tables may vary slightly and figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that precede them.

APPENDIX 1

CONDITIONS AND FURTHER TERMS OF THE OFFER

PART 1

CONDITIONS OF THE OFFER

The Offer will be made on the terms and conditions set out in this Appendix and in the Offer Document and the Form of Acceptance.

1. Conditions to the Offer

The Offer will be subject to the following conditions:

Acceptance Condition

(a) valid acceptances being received (and not, where permitted, withdrawn) by no later than 1.00 p.m. (London time) on the First Closing Date of the Offer (or such later time(s) and/or date(s) as Capita may, with the consent of the Panel or in accordance with the Code, decide) in respect of Xchanging Shares which, together with all other Xchanging Shares acquired by Capita (whether pursuant to the Offer or otherwise), carry not less than 90 per cent. (or such lower percentage as Capita may decide) in nominal value of the Xchanging Shares to which the Offer relates and represent not less than 90 per cent. (or such lower percentage as Capita may, subject to the Code, decide) of the voting rights attached to such Xchanging Shares, provided that this Condition will not be satisfied unless Capita and/or any of its wholly-owned subsidiaries shall have acquired, or agreed to acquire, pursuant to the Offer or otherwise, Xchanging Shares carrying more than 50 per cent. of the voting rights then normally exercisable at a general meeting of Xchanging, including for this purpose (to the extent, if any, required by the Panel) any such voting rights attaching to any Xchanging Shares that are unconditionally allotted or issued before the Offer becomes, or is declared, unconditional as to acceptances whether pursuant to the exercise of any outstanding subscription or conversion rights or otherwise and for the purposes of this Condition:

(i) shares which have been unconditionally allotted but not issued before the Offer becomes, or is declared, unconditional as to acceptances, whether pursuant to the exercise of any outstanding subscription or conversion rights or otherwise, shall be deemed to carry the voting rights they will carry on issue;

(ii) the expression "Xchanging Shares to which the Offer relates" shall be construed in accordance with Chapter 3 of Part 28 of the Companies Act 2006;

(iii) Xchanging Shares (if any) that cease to be held in treasury before the Offer becomes, or is declared, unconditional as to acceptances are Xchanging Shares to which the Offer relates; and

(iv) valid acceptances shall be deemed to have been received in respect of Xchanging Shares which are treated for the purposes of Part 28 of the Companies Act 2006 as having been acquired, or contracted to be acquired, by Capita and/or any of its wholly-owned subsidiaries by virtue of acceptances of the Offer;

US and German merger control clearances

(b)

United States

(i) in so far as the Offer is required to be notified under the US merger control regime, all necessary notifications and filings having been made and all applicable waiting periods (including any extensions thereof) under the United States Hart-Scott-Rodino Antitrust Improvements Act of 1976 (as amended) and the rules and regulations made thereunder having expired, lapsed or been terminated as appropriate in each case in respect of the Offer without a request for additional information having been made by the FTC or the Antitrust Division of the Department of Justice; and

Germany

(ii) in so far as the Offer is required to be notified under the German merger control regime, the German Bundeskartellamt deciding that the prohibition criteria in German Act against Restraints of Competition (Gesetz gegen Wettbewerbsbeschränkungen) are not satisfied, or being deemed to have made such a decision;

Other regulatory approvals

(c)

United Kingdom

(i) without limitation to the Condition set out at paragraph (d) below:

(A) the FCA having notified in writing any required approval in accordance with Part XII of FSMA to the proposed acquisition of control over each UK authorised person in the Wider Xchanging Group by Capita; or

(B) the period of 60 Working Days (as defined in section 191G of FSMA, excluding any interruption period imposed by the FCA in accordance with section 190 of FSMA) having elapsed from the date of acknowledgement of receipt of a complete application by the FCA for the proposed acquisition of each UK authorised person in the Wider Xchanging Group by Capita without the FCA having objected to the proposed acquisition of any UK authorised person in the Wider Xchanging Group,

and, for the purposes of paragraphs (c)(i)(A) and (B) above, "control" shall have the meaning given to it in Part XII of FSMA and "controller" shall have the meaning given to it in section 422 of FSMA; and

Germany

(ii) without limitations to the Condition set out at paragraph (d) below:

(A) the competent regulator under Sec. 2c KWG ("Gesetz über das Kreditwesen", the German Banking Act) having confirmed in writing that it has no objections to the proposed acquisition of a substantial holding in a German institution supervised under the KWG in the Wider Xchanging Group by Capita; or

(B) the period of 60 working days (as defined in section 2c (1a) KWG), excluding any interruption period imposed by the BaFin ("Bundesanstalt für Finanzdienstleistungsaufsicht") in accordance with section 2c (1a) KWG having elapsed from the date of acknowledgement of receipt of a complete notification under Sec. 2c KWG in connection with the InhKontrollV ("Inhaberkontrollverordnung", the German Regulation on Ownership Control) for the proposed acquisition by Capita of a substantial holding in a German institution supervised under the KWG in the Wider Xchanging Group, without the competent regulator under Sec. 2c KWG having objected to the proposed acquisition,

and, for the purposes of paragraphs (c)(ii)(A) and (B) above, "substantial holding" shall have the meaning given to it in Sec. 1 (9) KWG;

Other third party clearances

(d) other than in relation to the merger control and regulatory approvals referred to in paragraphs (b) and (c) above, no government or governmental, quasi-governmental, supranational, statutory, administrative or regulatory body or association, institution or agency (including any trade agency) or any court or other body (including any professional or environmental body) or person in any jurisdiction (each a "Relevant Authority") having decided to take, institute or threaten any action, proceeding, suit, investigation, enquiry or reference or enacted, made or proposed and there not continuing to be outstanding any statute, regulation, order or decision that would or might reasonably be expected to:

(i) make the acquisition or the proposed acquisition of Xchanging Shares, or control or management of Xchanging by Capita or any member of the Wider Capita Group void, unenforceable or illegal in any jurisdiction or, directly or indirectly, prohibit or otherwise restrict, delay or interfere with the implementation of, or impose additional conditions or obligations with respect to, or otherwise challenge or require amendment to the terms of, the Offer or the proposed acquisition of any Xchanging Shares, or control or management of Xchanging by Capita or any member of the Wider Capita Group in any case which is material in the context of the Offer;

(ii) require, prevent or delay the divestiture (or alter the terms of any proposed divestiture) by the Wider Capita Group or the Wider Xchanging Group of all or any part of their respective businesses, assets or properties, or impose any limitation on their ability to conduct all or any part of their respective businesses and to own, control or manage any of their respective assets or properties to an extent which is, in any such case, material in the context of the Wider Capita Group or the Wider Xchanging Group, taken as a whole;

(iii) impose any limitation on, or result in any delay in, the ability of any member of the Wider Capita Group to acquire or hold or to exercise effectively, directly or indirectly, all or any rights of ownership of shares or other securities (or the equivalent) in, or to exercise management control over, any member of the Wider Xchanging Group or on the ability of the Wider Xchanging Group to hold or exercise effectively, directly or indirectly, all or any rights of ownership of shares or other securities (or the equivalent) in, or to exercise management control over, any other member of the Wider Xchanging Group to an extent which is, in any such case, material in the context of the Wider Xchanging Group, taken as a whole;

(iv) require any member of the Wider Capita Group or of the Wider Xchanging Group to acquire or offer to acquire any shares or other securities (or the equivalent) or interest in any member of the Wider Xchanging Group or any member of the Wider Capita Group owned by a third party (other than in the implementation of the Acquisition) where such acquisition would be material in the context of the Wider Capita Group or the Wider Xchanging Group, taken as a whole;

(v) require the divestiture by any member of the Wider Capita Group of any shares, securities or other interests in any member of the Wider Xchanging Group where such divestiture would be material in the context of the Wider Xchanging Group, taken as whole;

(vi) impose any limitation on, or result in any delay in, the ability of any member of the Wider Capita Group or the Wider Xchanging Group to integrate or co-ordinate its business, or any part of it, with the businesses or any part of the businesses of any other member of the Wider Capita Group and/or the Wider Xchanging Group to an extent which is, in any such case, material in the context of the Wider Capita Group or the Wider Xchanging Group, taken as a whole;

(vii) result in any member of the Wider Capita Group or the Wider Xchanging Group ceasing to be able to carry on business under any name under which it presently does so to an extent which is, in any such case, material in the context of the Wider Capita Group or the Wider Xchanging Group, taken as a whole; or

(viii) save as Disclosed, otherwise adversely affect the business, assets, financial or trading position or profits or prospects of any member of the Wider Capita Group or the Wider Xchanging Group in each case in a manner which is material in the context of the Wider Capita Group or the Wider Xchanging Group, taken as a whole,

and all applicable waiting and other time periods (including extensions thereof) during which any such Relevant Authority could decide to take, institute or threaten any such action, proceeding, suit, investigation, enquiry or reference having expired, lapsed or been terminated;

(e) other than in relation to the merger control and regulatory approvals referred to in paragraphs (b) to (d) above, all filings, applications and/or notifications which are necessary or reasonably considered appropriate by Capita having been made and all relevant waiting periods and other time periods (including any extensions thereof) under any applicable legislation or regulation of any jurisdiction having expired, lapsed or been terminated and all applicable statutory or regulatory obligations in any jurisdiction having been complied with in each case in respect of the Offer and the acquisition or the proposed acquisition of any shares or other securities in, or control or management of, Xchanging or any member of the Wider Xchanging Group by any member of the Wider Capita Group or the carrying on by any member of the Wider Xchanging Group of its business;

(f) other than in relation to the merger control and regulatory approvals referred to in paragraphs (b) to (d) above, all authorisations, orders, grants, recognitions, confirmations, licences, consents, clearances, permissions and approvals which are necessary or reasonably considered appropriate by Capita in any jurisdiction for or in respect of the Acquisition and the proposed acquisition of Xchanging Shares, or control of Xchanging, by Capita or any member of the Wider Capita Group being obtained on terms and in a form reasonably satisfactory to Capita from appropriate Relevant Authorities, or from any persons or bodies with whom any member of the Wider Capita Group or the Wider Xchanging Group has entered into contractual arrangements or other business relationships, and such authorisations, orders, grants, recognitions, confirmations, licences, consents, clearances, permissions and approvals, together with all authorisations, orders, grants, recognitions, confirmations, licences, consents, clearances, permissions and approvals necessary or reasonably considered appropriate for any member of the Wider Xchanging Group to carry on its business, remaining in full force and effect and no intimation of any intention to revoke, suspend, restrict or modify or not to renew any of the same having been made and all necessary statutory or regulatory obligations in any jurisdiction having been complied with;

(g) there being no temporary restraining order, preliminary or permanent injunction, preliminary or permanent enjoinment, or other order threatened or issued and being in effect by a court or other Relevant Authority which has the effect of making the Acquisition or any acquisition or proposed acquisition of any shares or other securities in, or control or management of, any member of the Wider Xchanging Group by any member of the Wider Capita Group or the implementation of either of them, void, voidable, illegal and/or unenforceable under the laws of any relevant jurisdiction or otherwise, directly, or indirectly, prohibiting, preventing, restraining, restricting, delaying or otherwise interfering with the consummation or the approval of the Acquisition or any matter arising from the proposed acquisition of any shares of other securities in, or control or management of, any member of the Wider Xchanging Group by any member of the Wider Capita Group;

Confirmation of absence of adverse circumstances

(h) save as Disclosed, there being no provision of any authorisation, agreement, arrangement, licence, permit, lease, franchise or other instrument to which any member of the Wider Xchanging Group is a party or by or to which any such member or any of its assets is or may be bound, entitled or subject which, as a result of the Acquisition or the acquisition or proposed acquisition by Capita or any member of the Wider Capita Group of any Xchanging Shares, or change in the control or management of Xchanging or otherwise, would or might reasonably be expected to result in:

(i) any monies borrowed by or any other indebtedness (actual or contingent) of, or any grant available to, any member of the Wider Xchanging Group becoming repayable, or capable of being declared repayable, immediately or earlier than the stated maturity or repayment date or the ability of such member to borrow monies or incur any indebtedness being withdrawn or inhibited;

(ii) the rights, liabilities, obligations, interests or business of any member of the Wider Xchanging Group under any such authorisation, agreement, arrangement, licence, permit, lease, franchise or other instrument or the rights, liabilities, obligations, interests or business of any member of the Wider Xchanging Group in or with any other firm or company or body or person (or any agreement or arrangement relating to any such rights, liabilities, obligations, interests or business) being, or becoming capable of being, terminated or adversely modified or adversely affected or any onerous obligation or liability arising or any material adverse action being taken or arising thereunder;

(iii) the creation or enforcement of any mortgage, charge or other security interest over the whole or any material part of the business, property or assets of any member of the Wider Xchanging Group or any such mortgage, charge or other security interest (whenever arising or having arisen) becoming enforceable;

(iv) any assets, property or interest of, or any asset the use of which is enjoyed by, any member of the Wider Xchanging Group being, or falling to be, disposed of by, or ceasing to be available to, any member of the Wider Xchanging Group or any right arising under which any such asset or interest could be required to be disposed of or charged or could cease to be available to any member of the Wider Xchanging Group;

(v) any member of the Wider Xchanging Group ceasing to be able to carry on business under any name under which it presently does so to an extent which is material in the context of the Wider Xchanging Group, taken as a whole;

(vi) the financial or trading or regulatory position or prospects or the value of any member of the Wider Xchanging Group being materially prejudiced or materially adversely affected;

(vii) the creation, acceleration or assumption of any liabilities (actual, contingent or prospective) by any member of the Wider Xchanging Group in a manner which is material in the context of the Wider Xchanging Group, taken as a whole;

(viii) any requirement on any member of the Wider Xchanging Group to acquire, subscribe, pay up or repay any shares or other securities (or the equivalent) in and/or any indebtedness of any member of the Wider Xchanging Group owned by any third party to an extent which is material in the context of the Wider Xchanging Group, taken as a whole;

(ix) any material liability of any member of the Wider Xchanging Group to make any severance, termination, bonus or other payment to any of its directors or other officers; and

(x) no event having occurred which, under any provision of any such authorisation, agreement, arrangement, licence, permit, lease, franchise or other instrument to which any member of the Wider Xchanging Group is a party or by or to which any such member or any of its assets may be bound or be subject, could result in any of the events or circumstances as are referred to in this paragraph (h);

No material transactions, claims or changes in the conduct of the business of Xchanging:

(i) save as Disclosed, no member of the Wider Xchanging Group has since 31 December 2014:

(i) issued, agreed to issue, authorised or proposed the issue of, additional shares of any class, or securities convertible into, or exchangeable for, or rights, warrants or options to subscribe for or acquire, any such shares or convertible or exchangeable securities or transferred or sold (or agreed to transfer or sell) any shares out of treasury (except, where relevant, as between Xchanging and its wholly-owned subsidiaries or between its wholly-owned subsidiaries and except in connection with the ongoing operation of the Xchanging Share Schemes (in accordance with their respective terms);

(ii) recommended, declared, paid or made or proposed or resolved to recommend, declare, pay or make any bonus issue, dividend or other distribution, whether payable in cash or otherwise, other than a distribution to Xchanging or one of its wholly-owned subsidiaries;

(iii) other than pursuant to the Offer, implemented or authorised any merger or demerger or (except for transactions between Xchanging and its wholly-owned subsidiaries, or between its wholly-owned subsidiaries or transactions in the ordinary course of business) acquired or disposed of or transferred, mortgaged or charged, or created any other security interest over, any asset or any right, title or interest in any asset or authorised, proposed or announced any intention to do so;

(iv) (except for transactions between Xchanging and its wholly-owned subsidiaries, or between its wholly-owned subsidiaries or transactions in the ordinary course of business) entered into, or authorised, proposed or announced the entry into, any joint venture, asset or profit-sharing arrangement, partnership or merger of businesses or corporate entities;

(v) (except for transactions between Xchanging and its wholly-owned subsidiaries, or between its wholly-owned subsidiaries or transactions in the ordinary course of business) other than pursuant to the Offer, implemented or authorised any reconstruction, amalgamation, scheme or other transaction or arrangement with a substantially equivalent effect;

(vi) (except for transactions between Xchanging and its wholly-owned subsidiaries, or between its wholly-owned subsidiaries or transactions in the ordinary course of business) purchased, redeemed or repaid any of its own shares or other securities or reduced or made or authorised any other change in its share capital;

(vii) (except for transactions between Xchanging and its wholly-owned subsidiaries or between its wholly-owned subsidiaries) made or authorised any change in its loan capital or issued or authorised the issue of any debentures or incurred or increased any indebtedness or contingent liability;

(viii) entered into, varied or terminated, or authorised the entry into, variation or termination of, any contract, commitment or arrangement (whether in respect of capital expenditure, real estate or otherwise) which is outside the ordinary course of business or which is of a long term, onerous or unusual nature or magnitude or which involves, or might reasonably be expected to involve, an obligation of a material nature or magnitude which is restrictive on the business of any member of the Wider Xchanging Group;

(ix) been unable or deemed unable, or admitted in writing that it is unable, to pay its debts as they fall due or having stopped or suspended (or threatened to stop or suspend) payment of its debts generally or ceased or threatened to cease carrying on all or a substantial part of its business;

(x) commenced negotiations with any of its creditors or taken any step with a view to rescheduling or restructuring any of its indebtedness or entered into a composition, compromise, assignment or arrangement with any of its creditors whether by way of a voluntary arrangement, scheme of arrangement, deed of compromise or otherwise;

(xi) (other than in respect of a subsidiary of Xchanging which is dormant and solvent at the relevant time) taken any corporate action or had any legal proceedings started, served or threatened against it or any documents filed or faxed in court for its winding-up (voluntary or otherwise), dissolution or reorganisation (or for any analogous proceedings or steps in any jurisdiction) or for the appointment of a liquidator, provisional liquidator, receiver, administrator, administrative receiver, trustee or similar officer (or for the appointment of any analogous person in any jurisdiction) of all or any of its assets and revenues or had notice given of the intention to appoint any of the foregoing to it;

(xii) except in the ordinary course of business, waived, compromised, settled, abandoned or admitted any material dispute, claim or counter-claim whether made or potential and whether by or against any member of the Wider Xchanging Group;

(xiii) made any material alteration or amendment to its constitutional documents;

(xiv) entered into, or varied the terms of, or terminated or given notice of termination of, any service agreement or arrangement with any director or senior executive of the Wider Xchanging Group;

(xv) proposed, agreed to provide, or agreed to modify the terms of, any share option scheme, incentive scheme or other benefit relating to the employment or termination of employment of any person employed by the Wider Xchanging Group, other than in accordance with the terms of the Offer;

(xvi) made or consented to any material change to the terms of the trust deeds constituting the pension scheme(s) established for its directors and/or employees and/or their dependants or to the benefits which accrue, or to the pensions which are payable thereunder, or to the basis on which qualification for or accrual or entitlement to such benefits or pensions are calculated or determined, or to the basis upon which the liabilities (including pensions) of such pension schemes are funded or made, or agreed or consented to, any change to the trustees, other than in accordance with applicable law;

(xvii) save as between Xchanging and its wholly-owned subsidiaries, granted any lease in respect of any of the leasehold or freehold property owned or occupied by it or transferred or otherwise disposed of any such property; or

(xviii) entered into any contract, commitment or arrangement or passed any resolution or made any offer (which remains open for acceptance) with respect to, or proposed or announced any intention to effect or propose, any of the transactions, matters or events referred to in this paragraph (i);

(j) save as Disclosed, since 31 December 2014:

(i) no adverse change or deterioration having occurred and no events, matters or circumstances having arisen which would or might reasonably be expected to result in any adverse change or deterioration in the business, assets, financial, trading or regulatory position or profits or prospects or operational performance or legal or regulatory position of any member of the Wider Xchanging Group (in each case, to an extent which is material in the context of the Wider Xchanging Group, taken as a whole or in the context of the Offer); and

(ii) no litigation, arbitration proceedings, prosecution or other legal proceedings in any jurisdiction having been threatened, announced, instituted or remaining outstanding by, against or in respect of any member of the Wider Xchanging Group or to which any member of the Wider Xchanging Group is a party (whether as claimant or defendant or otherwise) and no investigation by any Relevant Authority or other investigative body against or in respect of any member of the Wider Xchanging Group having been threatened, announced, instituted or remaining outstanding by, against or in respect of any member of the Wider Xchanging Group (in each case, to an extent which is material in the context of the Wider Xchanging Group taken as a whole or in the context of the Offer);

(k) save as Disclosed, no contingent or other liability having arisen outside the ordinary course of business which would or might reasonably be expected to adversely affect Xchanging (in each case to an extent which is material in the context of the Wider Xchanging Group taken as a whole or in the context of the Offer); and

(l) save as Disclosed, Capita not having discovered:

(i) that any financial, business or other information concerning any member of the Wider Xchanging Group publicly disclosed prior to the date of this announcement at any time by any member of the Wider Xchanging Group is misleading, contains a misrepresentation of fact or omits to state a fact necessary to make the information contained therein not misleading and which was not subsequently corrected before the date of this announcement by disclosure by, or on behalf of, the Wider Xchanging Group through the publication of an announcement via a Regulatory Information Service;

(ii) that any member of the Wider Xchanging Group is subject to any liability, actual, contingent, prospective or otherwise, other than in the ordinary course of business (in each case to an extent which is material in the context of the Wider Xchanging Group taken as a whole or in the context of the Offer); or

(iii) any information which materially adversely affects the import of any information Disclosed at any time;

(m) save as Disclosed, Capita not having discovered that:

(i) any past or present member of the Wider Xchanging Group has not complied with any applicable legislation or regulations, notices or other requirements of any jurisdiction or Relevant Authority with regard to environmental matters or the health and safety of any person, or that there has otherwise been any breach of environmental or health and safety law or that there is any environmental condition which, in any case, would be likely to give rise to any liability (whether actual, contingent or prospective) or cost on the part of any member of the Wider Xchanging Group which, in any case, is material in the context of the Wider Xchanging Group, taken as a whole; or

(ii) there is, or is likely to be, any liability, whether actual, contingent or prospective, to make good, repair, reinstate or clean up any property now or previously owned, occupied or made use of by any past or present member of the Wider Xchanging Group or any controlled waters under any environmental law or which has or could result in the closure of any property required by any member of the Wider Xchanging Group which, in any case, is material in the context of the Wider Xchanging Group, taken as a whole; and

(n) no circumstance having arisen or event having occurred in relation to any intellectual property owned or used by any member of the Wider Xchanging Group, which would have a material adverse effect on the Wider Xchanging Group, taken as a whole, including:

(i) any member of the Wider Xchanging Group losing its title to any of its intellectual property, or any intellectual property owned by the Wider Xchanging Group being revoked, cancelled or declared invalid;

(ii) any claim being asserted or threatened by any person challenging the ownership of any member of the Wider Xchanging Group to, or the validity or effectiveness of, any of its intellectual property; or

(iii) any agreement regarding the use of any intellectual property licensed to or by any member of the Wider Xchanging Group being terminated or varied.

PART 2

CERTAIN FURTHER TERMS OF THE OFFER

Capita reserves the right (subject to the requirements of the Code and the Panel) to waive, in whole or in part, all or any of the Conditions in paragraphs (b), (c)(ii) and (d) to (n) (inclusive) of Part 1, in whole or in part, at its absolute discretion.

Capita shall be under no obligation to waive or treat as fulfilled any of the Conditions in paragraphs (b), (c)(ii) and (d) to (n) (inclusive) of Part 1 by a date earlier than the latest date specified below for the fulfilment of them notwithstanding that the other Conditions may at such earlier date have been waived or fulfilled and that there are at such earlier date no circumstances indicating that any of such Conditions may not be capable of fulfilment.

At such time as the Conditions in paragraphs (a) and (c) of Part 1 have been satisfied, Capita will declare the Offer unconditional in all respects unless it has at that time notified the Panel and Xchanging of some fact or circumstance which entitles (or might reasonably be expected with further investigation to entitle) it to declare the Offer to have lapsed in reliance on some other condition.

The Offer will lapse unless all Conditions to the Offer are fulfilled or (if capable of waiver) waived or, where appropriate, determined by Capita to have been or remain satisfied by midnight (London time) on the date which is 21 days after the later of the First Closing Date and the date on which the Offer becomes, or is declared, unconditional as to acceptances (or such later date (if any) as Capita may, with the consent of the Panel or in accordance with the Code, decide).

The Offer will lapse if there is a CMA Phase 2 Reference before the later of 1.00 p.m. on the First Closing Date and the date on which the Offer becomes, or is declared, unconditional as to acceptances. If the Offer does so lapse, not only will the Offer cease to be capable of further acceptance but also Xchanging Shareholders and Capita will thereafter cease to be bound by prior acceptances.

If Capita is required by the Panel to make a mandatory offer for Xchanging Shares under Rule 9 of the Code, Capita may make such alterations to the above Conditions as are necessary to comply with the provisions of that Rule.

With respect to the Clearances that are required for the satisfaction of the Merger Control Conditions, it is agreed that Capita shall use its best endeavours to procure that the Merger Control Conditions are fulfilled as soon as is reasonably practicable after the date of this announcement and, in any event, in order to obtain such Clearances during the first phase of such merger control processes. Such endeavours will, if necessary, include, but are not limited to, proposing, negotiating, offering and agreeing with any relevant Merger Control Authority at the earliest appropriate opportunity (and in any event before any applicable deadline to offer remedies) to effect (and if such offer is accepted, undertaking to effect), by agreement, order or otherwise, the sale, divestiture, licence or disposition of any necessary assets or businesses of Xchanging or the Xchanging Group and/or Capita or the Capita Group.

The Xchanging Shares will be acquired by Capita fully paid and free from all liens, charges, encumbrances, rights of pre-emption and any other third party rights of any nature whatsoever and together with all rights attaching to them as at the date of this announcement or subsequently attaching or accruing to them, including, without limitation, voting rights and the right to receive and retain, in full, all dividends and other distributions (if any) declared, made or paid, or any other return of capital (whether by way of reduction of share capital or share premium account or otherwise) made on or after the date of this announcement. Accordingly, insofar as a dividend and/or distribution and/or a return of capital is proposed, declared, made, paid or payable by Xchanging in respect of an Xchanging Share on or after the date of this announcement, Capita reserves the right to reduce by the amount of the dividend and/or distribution and/or return of capital, the price payable under the Offer in respect of an Xchanging Share, except insofar as the Xchanging Share is or will be transferred pursuant to the Offer on a basis which entitles Capita alone to receive the dividend and/or distribution and/or return of capital but if that reduction in price has not been effected, the person to whom the Offer Price is paid in respect of that Xchanging Share, will be obliged to account to Capita for the amount of such dividend and/or distribution and/or return of capital.

Save in respect of the Conditions contained in paragraph (a) of Part 1, under Rule 13.5 of the Code, Capita may not invoke a Condition so as to cause the Offer not to proceed, to lapse or to be withdrawn unless the circumstances that give rise to the right to invoke the Condition are of material significance to Capita in the context of the Offer. The Condition contained in paragraph (a) of Part 1 is not subject to this provision of the Code.

Capita reserves the right, subject to the prior consent of the Panel, to implement the Offer by way of a Scheme. In such event, the Offer will be implemented on the same terms, so far as applicable, as those which would apply under a contractual offer, subject to appropriate amendments to reflect the change in method of effecting the Offer.

Each of the Conditions shall be regarded as a separate Condition and shall not be limited by reference to any other Condition.

The Offer will be governed by the laws of England and Wales and will be subject to the jurisdiction of the Courts of England and Wales and to the Conditions and further terms set out in this announcement and to be set out in the Offer Document. The Offer will be subject to the applicable requirements of the UK Listing Authority, the PRA, the FCA, the Financial Services Commission, the CMA, FSMA, the London Stock Exchange and the Code. This announcement does not constitute, or form part of, an offer or invitation to purchase Xchanging Shares or any other securities.

The ability to effect the Offer in respect of persons resident in certain jurisdictions may be affected by the laws of those jurisdictions. Before taking any action in relation to the Offer, holders of Xchanging Shares should inform themselves about and observe any applicable requirements.

Unless otherwise determined by Capita or required by the Code and permitted by applicable law and regulation:

• the Offer is not being, and will not be, made available, directly or indirectly, in or into or by the use of the mails of, or by any other means or instrumentality (including, without limitation, facsimile transmission, telex, telephone, internet or other forms of electronic transmission) of interstate or foreign commerce of, or by any facility of a national state or other securities exchange of any Restricted Jurisdiction and no person may vote using any such use, means, instrumentality or facility or from within any Restricted Jurisdiction; and

• this announcement should not be forwarded or transmitted in or into any jurisdiction in which such act would constitute a violation of the relevant laws in such jurisdiction.

APPENDIX 2

GENERAL SOURCES OF INFORMATION AND BASES OF CALCULATION

In this announcement, unless otherwise stated, or the context otherwise requires, the following bases and sources have been used:

· Unless otherwise stated, the financial information relating to Capita is extracted (without material adjustment) from the audited consolidated financial statements of Capita for the relevant financial years or from the unaudited interim consolidated financial statements of Capita for the relevant financial periods, prepared in accordance with IFRS.

· Unless otherwise stated, the financial information relating to Xchanging is extracted (without material adjustment) from the audited consolidated financial statements of Xchanging for the relevant financial years or from the unaudited interim consolidated financial statements of Xchanging for the relevant financial periods, prepared in accordance with IFRS.

· The financial data relating to synergies, cost savings and other financial benefits of the Acquisition are unaudited and are based on analysis by Capita's management and on Capita's and Xchanging's internal records.

· Any references to the value of the Offer for the whole of the issued ordinary share capital of Xchanging assume the number of Xchanging Shares currently in issue to be 247,851,399.

· Any references to the availability to Capita of the necessary resources to implement the Offer in full also assume that there are currently options and/or awards outstanding in respect of 9,796,980 unissued Xchanging Shares (excluding options and/or awards whose exercise price is above the Offer Price or where the relevant performance criteria have not been met).

· Any references to the existing issued share capital of Xchanging are based on 247,851,399 Xchanging Shares in issue as at 13 October 2015 (being the last Business Day prior to the date of this announcement).

· Unless otherwise stated, all prices and closing prices for Xchanging Shares are closing middle market quotations derived from the London Stock Exchange Daily Official List (SEDOL).

APPENDIX 3

DEFINITIONS

The following definitions apply throughout this announcement, unless the context otherwise requires:

For the purposes of this announcement:

a) "subsidiary", "subsidiary undertaking", "undertaking" and "associated undertaking" have the respective meanings given by the Companies Act 2006;

b) references to time in this announcement are to London time unless otherwise stated;

c) references to a gender include the other genders; and

d) references to an enactment include references to that enactment as amended, replaced, consolidated or re-enacted by or under any other enactment before or after the date of this announcement.