485 Lexington Avenue
New York, NY 10017

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

February 15, 2010

2010 Management Letter

We provide advisory and information solutions to improve client performance.

With the worst of the 2009 economic crisis behind it, the Financial Industry finds itself with an unprecedented challenge of leading the recovery while handicapped by disruptive regulation and sluggish demand. Compounding the challenge is the thorny task of restoring capital lost in the crisis, while simultaneously reducing risk-taking initiatives necessary to accumulate the capital.

This daunting environment caused clients to become even more demanding of their advisors and vendors last year. Services failing to generate meaningful, near-term, and auditable returns were slashed from budgets at major banks, brokerages and insurers. As a result, numerous major consulting firms were forced into fire sales, or severe retrenchment as client revenues declined sharply. In contrast, Novantas was privileged to play an increasingly important and sizable role in the success of the largest Financial Institutions, resulting in a record performance for the Firm.

The Novantas mission remains steadfast since our founding: To provide our financial industry clients with distinctive insights and tools to win in competitive and rapidly changing markets. We are honored to have served these outstanding clients, and look forward to remaining a part of their extraordinary successes.

The Firm’s work in revenue enhancement, performance optimization and risk management helped our clients, in immediate and tangible ways, to prevail over their competitors, as costs were slashed in non-essential activities. During 2009, Novantas worked for more than 40 major financial institutions around the world, providing innovative and demonstrable solutions to growth challenges in the constrained and volatile markets:

• As bank consolidation swept the landscape, we were selected to advise in 12 of the 20 largest U.S. retail bank acquisitions. Our deep industry understanding and proprietary market data helped acquirers to make informed decisions about transaction valuation, distribution restructuring, pricing, and product integration.
• As new laws and regulations imposed wrenching changes on fee structures, we led the industry in designing innovative payments and savings products, modified fee models, and successful customer transitioning programs grounded in needs-based customer insights. These pioneering marketing strategies helped our clients to retain critical fee revenue and customers at a time when many others could not.
• As traditional credit models failed across the industry, we showed consumer lenders how to more precisely diagnose embedded and emerging risk in home equity and credit card portfolios, and developed progressive risk management methodologies structured around the Firm’s distinctive “behavioral life” risk modeling.
• As retirement assets experienced unprecedented fluctuation and migration among product categories, we helped institutions identify vast pools of retirement-earmarked balances held in everyday banking products, and advised on strategies to retain and deepen customer relationships in this important “shadow retirement market.”
• As new middle market lending opportunities emerged in the face of collapsing funding sources, we assisted commercial banks in codifying the demand characteristics and wallet structures of their end customers, resulting in more effective corporate banking strategies, innovations in sales practices, and better marketing, prospecting, product design and pricing.

Our clients increasingly call upon us to help them: improve performance in this unaccommodating environment; grow in a stagnant market; innovate products in a newly constrained regulatory environment; and price profitably in a world of sometimes irrational competitors. They seek the Firm’s expertise and systematic solutions to improve precision in segmentation and strategy, and accelerate tactical responses to competitor initiatives and market shifts. As a result, in 2009, the Firm’s revenues and net income increased by more than 15%, and contract backlogs extended by more than 25%, representing a shift from periodic projects toward long-term contract agreements with client organizations. We are optimistic that 2010 will continue to see a robust level of Firm growth, further buoyed by the recovering market for advisory services. We continue to deliver our services through three core insight-focused value propositions.

Our Consulting Group provides analytically-driven insights through deep industry knowledge, senior expertise, unmatched relationships with industry associations, universities, and government agencies, and relentless focus on client revenue.

Our Solutions Group provides information-driven insights through highly specialized industry applications, sophisticated modeling tools and disciplined methodologies for deposit and credit pricing optimization, as well as systems for distribution planning, campaign management and customer profitability. Ten of the top thirty U.S. banks, numerous other financial institutions, have implemented our applications.

Novarica, our Research Group provides expertise and survey based insights, primarily to the Insurance Industry. The division has grown more than 50% per year since inception, and serves more than 100 major insurers.

Finally, in 2009, Novantas acquired Demand Technologies Group in Toronto, ON to expand our services in the Canada market. We relocated our Toronto office to be closer to the major clients we serve in the financial district, and established a new office in Boston.

We want to thank our extraordinary clients, and our dedicated team for making 2009 a record year for the Firm. We look forward to another year of service to the financial industries.

David G. Kaytes
Co-CEO