NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in Millions Except Per Share Amounts)

(Unaudited)

Convergys Corporation (the Company or Convergys) is a global leader in Relationship Management. The Company provides solutions that drive more value from the relationships its clients have with their customers and employees. Convergys turns these everyday interactions into a source of profit and strategic advantage for the Company’s clients. For 25 years, the Company’s unique combination of domain expertise, operational excellence and innovative technologies has delivered process improvement and actionable business insight to clients’ customers and employees that now span more than 70 countries and 35 languages.

The Company reports three segments: (i) Customer Management, which provides outsourced agent-assisted and self-service customer care solutions as well as consulting and technology solutions to the in-house market, (ii) Information Management, which provides business and operating support system solutions for the global communications industry; and (iii) HR Management, which provides human resource business process outsourcing solutions, talent management and learning solutions.

These financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) and, in the opinion of management, include all adjustments necessary for a fair presentation of the results of operations, financial position and cash flows for each period shown. All adjustments are of a normal and recurring nature. Certain information and footnote disclosures normally included in Financial Statements prepared in accordance with generally accepted accounting principles in the United States have been condensed or omitted. Interim Consolidated Financial Statements are not necessarily indicative of the financial position or operating results for an entire year. These interim Consolidated Financial Statements should be read in conjunction with the audited Financial Statements and the Notes thereto included in the Company’s Annual Report on Form 10-K for the period ended December 31, 2007.

We file annual, quarterly, current reports and proxy statements with the SEC. These filings are available to the public over the Internet on the SEC’s web site at http://www.sec.gov and on the Company’s web site at http://www.convergys.com. You may also read and copy any document we file with the SEC at its public reference facilities in Washington, D.C. You can also obtain copies of the documents at prescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference facilities. You can also inspect reports, proxy statements and other information about Convergys at the offices of the NYSE Euronext, 11 Wall Street, New York, New York 10005.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (SFAS No. 157), which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. SFAS No. 157 was effective for the Company beginning January 1, 2008 for all financial assets and liabilities and for nonfinancial assets and liabilities recognized or disclosed at fair value in the Consolidated Financial Statements on a recurring basis (at least annually). For all other nonfinancial assets and liabilities, SFAS No. 157 is effective beginning January 1, 2009. Adoption of this Standard on January 1, 2008 did not have an impact on the Company’s Financial Statements. See Note 6 of Notes to Consolidated Financial Statements for disclosures related to the adoption of this Standard. The Company is in the process of evaluating the impact that SFAS No. 157 will have on nonfinancial assets and liabilities not valued on a recurring basis (at least annually).

In April 2007, the FASB issued EITF 06-04, “Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split Dollar Life Insurance Arrangements.” This Standard requires an employer to recognize a liability for future benefits in accordance with SFAS No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions,” if, in substance, a postretirement benefit plan exists. The Company adopted EITF 06-04 effective January 1, 2008. Adoption of this Standard did not have any impact on the Company’s Consolidated Statements of Operations and resulted in a $2.2 reduction to the retained earnings balance as of January 1, 2008.

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In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations,” (SFAS No. 141R) which replaces SFAS No. 141. SFAS No. 141R establishes principles and requirements for how an acquirer recognizes and measures in its Financial Statements the identifiable assets acquired, the liabilities assumed, any resulting goodwill and any noncontrolling interest in the acquiree. The Statement also provides for disclosures to enable users of the Financial Statements to evaluate the nature and financial effects of the business combination. SFAS No. 141R is effective for Financial Statements issued for fiscal years beginning after December 15, 2008 and must be applied prospectively to business combinations completed on or after that date. Accordingly, any business combinations the Company engages in will be recorded and disclosed following existing GAAP until December 31, 2008. Adoption of SFAS No. 141R will have an impact on the Company’s Consolidated Financial Statements when effective, but the nature and magnitude of the specific effects will depend upon the terms and size of the acquisitions consummated after the effective date.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements,” an Amendment to ARB No. 51. SFAS No. 160 applies to all entities that have an outstanding noncontrolling interest in one or more subsidiaries or that deconsolidate a subsidiary. SFAS No. 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. The adoption of SFAS No. 160 is not expected to have a material impact on the Company’s financial position, results of operations or liquidity.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities.” The new Standard is intended to help investors better understand how derivative instruments and hedging activities affect an entity’s financial position, financial performance and cash flows through enhanced disclosure requirements. SFAS No. 161 is effective for Financial Statements issued for fiscal years and interim periods beginning after November 15, 2008. The adoption of SFAS No. 161 is not expected to have a material impact on the Company’s financial position, results of operations or liquidity; however, our disclosures after adoption will comply with the new Standard.

In April 2008, the FASB issued Staff Position FAS142-3, “Determination of the Useful Life of Intangible Assets” (FSP FAS 142-3). FSP FAS 142-3 amends the factors that should be considered in developing renewal or extension assumption used to determine the useful life of a recognized intangible asset under FASB Statement No. 142, “Goodwill and Other Intangible Asset.” FSP FAS 142-3 also requires expanded disclosure related to the determination of intangible asset useful lives. FSP FAS 142-3 will be effective for Financial Statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. The Company is currently evaluating the impact that the adoption of FSP FAS 142-3 will have on the Company’s Consolidated Financial Statements.

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On September 3, 2008, the Company acquired 100 percent of the outstanding common shares of Intervoice, Inc. (Intervoice), a developer of automated voice response systems, for cash consideration of $335.0, or $8.25 per share. Intervoice is a market leader in the delivery of personalized, multi-channel automated information solutions that connect people with information, empowering them to control the way they interact with a business. Integration of Intervoice’s speech automation, web self-care and mobile applications with the Company’s array of automated and live agent services will enable the Company to build upon its leadership position in Relationship Management solutions. The designed voice solutions result in improved operational efficiencies, new revenue streams, and most importantly enhanced differentiation in the large and growing automated services market.

The Intervoice acquisition was accounted for as a purchase transaction. The purchase price has been allocated to fixed assets, liabilities and tangible and identifiable intangible assets based on preliminary independent appraisals of their respective fair values. The excess purchase price over the estimated fair value of the net assets acquired was allocated to goodwill. Intervoice’s results were included within the Customer Management segment upon acquisition and goodwill, as reflected in the table below, was entirely assigned to the Customer Management segment. The operating results of Intervoice were included in the Consolidated Financial Statements of the Company since the date of the acquisition. This acquisition was financed using the $400 Five-Year Competitive Advance and Revolving Credit Facility.

The Company is in the process of obtaining third-party valuations of the intangible assets; thus, the allocation of the purchase price is subject to change. The Company expects to finalize the opening balance sheet related to this acquisition by December 31, 2008. The purchase price and the preliminary allocation are as follows:

The acquisition does not meet the thresholds for a significant acquisition and, therefore, no pro forma financial information is presented.

The Company’s operating results for the three and nine months ended September 30, 2008 included long-term incentive plan expense of $2.9 and $13.1, respectively, compared to $3.3 and $20.1, respectively, for the same periods in 2007. Long-term incentive plan expense includes: (a) incentive plan expense that is paid in cash based on relative shareholder return and (b) stock compensation expense. Stock compensation expense for the three and nine months ended September 30, 2008 was $5.1 and $14.6, respectively, compared to $6.7 and $19.1 respectively, for the same periods in 2007.

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Restricted Stock Awards

During the first nine months of 2008, the Company granted 1.6 million shares of restricted stock units at a weighted average fair value of $12.91. Included in the above were approximately 1.2 million shares of performance-related restricted stock units granted at the fair value of $12.10 per share that vest upon the Company’s satisfaction of certain financial performance conditions (relative shareholder return versus the S&P 500 return) as of December 31, 2010. During the nine months ended September 30, 2007, the Company granted 1.5 million shares of restricted stock units at a weighted-average fair value of $24.12. Included in the above were approximately 440,000 shares of performance-related restricted stock units granted at the fair value of $21.09 per share that vest upon the Company’s satisfaction of certain financial conditions as of December 31, 2009.

The Company used a Monte Carlo simulation model to estimate the fair value for performance-based restricted stock units issued during 2008 and 2007. The assumptions used in this model for the awards are noted in the table below. Expected volatilities for the 2008 performance awards are based on historical volatility and daily returns for the three-year period ended January 1, 2008 of the Company’s stock and S&P 500 companies. The total stock return for the Company over the performance period is based on comparing Convergys’ average closing price from the fourth quarter of 2007 with the average expected closing price for the fourth quarter of 2010. The total stock return of the S&P 500 companies is computed by comparing the closing price of the S&P 500 companies on December 28, 2007 with the closing price at the end of December 2010. The risk-free interest rate for the expected term of the award granted is based on the U.S. Treasury yield curve in effect at the time of grant.

The total compensation cost related to non-vested restricted stock and restricted stock units not yet recognized as of September 30, 2008 was approximately $26, which is expected to be recognized over a weighted average of 1.5 years. Changes to non-vested restricted stock and restricted stock units for the nine months ended September 30, 2008 were as follows:

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2008 Restructuring

During the first quarter of 2008, the Company initiated a restructuring plan to align resources to future business needs and to shift the geographic mix of some of its resources. Restructuring actions were taken in each business segment, of which $6.9 related to Information Management, $5.4 related to Customer Management and $1.8 related to HR Management. The severance charge of $14.1 will largely be paid in cash pursuant to the Company’s existing severance policy and employment agreements. These actions, which will affect approximately 750 professional and administrative employees worldwide, are expected to be completed by the end of 2008.

Restructuring liability activity for the 2008 plan consisted of the following:

2007 Restructuring

During the third quarter of 2007, the Company recorded a restructuring charge of $3.4 at Information Management related to a facility closure in the United Kingdom. The $3.4 accrual is equal to the future costs associated with the abandoned facility, net of the proceeds from any probable future sublease agreements. The Company used estimates, based on consultation with its real estate advisors, to arrive at the proceeds from any future sublease agreements. The Company will continue to evaluate such estimates in recording the facilities abandonment charge. Consequently, there may be additional reversals or charges relating to this facility closure in the future. At September 30, 2008, this restructuring reserve had an outstanding balance of $1.7, which will be paid over several years until the lease expires.

As discussed in Note 2 of the Notes to Consolidated Financial Statements, adoption of SFAS No. 157 did not have an impact on the Company’s Financial Statements. SFAS No. 157 establishes a fair value hierarchy (Level 1 through 3) based on the quality of inputs used in the valuation technique to measure the fair value of identical assets and liabilities. The fair value hierarchy gives the highest priority to quoted market prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The following table summarizes the Company’s assets and liabilities measured at fair value on a recurring basis (at least annually) as of September 30, 2008:

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Goodwill increased to $1,110.3 at September 30, 2008 from $896.2 at December 31, 2007. The additions to the goodwill during the nine months ended September 30, 2008 mostly related to the acquisition of Intervoice, as discussed in Note 3 of the Notes to Consolidated Financial Statements.

As discussed more fully in the “Goodwill and Other Intangible Assets” section of the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007, the Company is required to test goodwill for impairment annually and at other times if events have occurred or circumstances exist that indicate the carrying value of goodwill may no longer be recoverable. During the third quarter of 2008, the Company performed an impairment review of the $130.3 of goodwill related to the HR Management segment. The review was triggered by the $207.5 of asset impairment charges taken during the third quarter of 2008 as described in Note 9 of the Notes to Consolidated Financial Statements. The impairment test for goodwill involves a two-step process. The first step compares the fair value of a reporting unit with its carrying amount, including the goodwill allocated to each reporting unit. If the carrying amount is in excess of the fair value, the second step requires the comparison of the implied fair value of the reporting unit goodwill with the carrying amount of the reporting unit goodwill. Any excess of the carrying value of the reporting unit goodwill over the implied fair value of the reporting unit goodwill will be recorded as an impairment loss. Fair value of the Company’s reporting unit is determined using a combination of the market approach and the income approach. Under the market approach, fair value is based on actual stock price or transaction prices of comparable companies. The market approach requires significant judgment regarding the selection of comparable companies. Under the income approach, value is dependent on the present value of net cash flows to be derived from the ownership. The income approach requires significant judgment including estimates about future cash flows and discount rates.

The Company has determined that the fair value of the HR Management segment is less than its carrying value as of September 30, 2008 and, therefore, the second step of the test is required. The Company has engaged an outside appraisal firm to assist in valuing the intangible assets of the HR Management segment. As this process is not complete, the Company cannot determine if an impairment loss is either probable or estimable. The Company expects to complete the step-two test no later than December 31, 2008. The resulting impairment loss, if any, will be recognized and reflected in the Consolidated Statements of Operations at that time.

Intangible assets (including software and customer relationships) increased to $120.3 at September 30, 2008 from $40.8 at December 31, 2007. The increase from the acquisition of Intervoice as discussed in Note 3 of the Notes to Consolidated Financial Statements was partially offset by amortization expenses. As of September 30, 2008, the Company’s total intangible assets acquired primarily through business combinations consisted of the following:

Customer relationships and other intangibles related amortization expense for the nine month period ended September 30, 2008 and 2007 was $9.9 and $6.5, respectively, and is estimated to be approximately $12 for the year ended December 31, 2008. As mentioned above, the increase in the total intangible assets is mostly related to the Intervoice acquisition, and the Company is in the process of obtaining third-party valuations of the intangible assets; thus, the amortization expense and the weighted average useful life of the total intangible assets is subject to change. The Company expects to finalize the opening balance sheet related to this acquisition by December 31, 2008.

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As discussed more fully in the “Income Taxes” section of the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007, the Company adopted the provisions of Financial Interpretation No. 48 (FIN 48), “Accounting for Uncertainty in Income Taxes,” effective January 1, 2007.

As of December 31, 2007, the liability for unrecognized tax benefits was $82.9, of which $1.5 is recorded within other current liabilities and $81.4 was recorded within other long-term liabilities in the accompanying Consolidated Financial Statements. As of September 30, 2008, the liability for unrecognized tax benefits was $66.9, of which $1.3 is recorded within other current liabilities and $65.6 is recorded within other long-term liabilities in the accompanying Consolidated Financial Statements. The total amount of net unrecognized tax benefits that would affect income tax expense, if ever recognized in the Financial Statements is $60.8. This amount includes net interest and penalties of $14.5. The decrease in the liability for unrecognized tax benefits of $16.0 from December 31, 2007 was largely due to resolution of tax audits in the current year. The Company believes that it is reasonably possible that the total amounts of unrecognized tax benefits will decrease between $13.0 and $23.0 in the next twelve months based upon the resolution of audits; however, actual developments in this area could differ from those currently expected.

The Company often performs, in connection with its outsourcing arrangements, certain set-up activities or implementations, including the installation and customization of the Company’s proprietary software in its centers. Additionally, with regard to arrangements where all of the services are accounted for as a single unit of accounting, the Company defers all revenue until it begins to deliver the final service. In connection with these arrangements, the Company capitalizes all direct and incremental multiple-element costs (by analogy to SFAS No. 91, “Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases”) to the extent recovery of these costs is probable. All implementation and set-up activity costs are amortized ratably over the life of the arrangements as costs of providing service. Deferred amounts are periodically evaluated for impairment or when circumstances indicate a possible inability to recover their carrying amounts. In the event these costs are not deemed recoverable, the Company follows the guidance in SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, to determine if an impairment exists. The Company evaluates the probability of recovery by considering profits to be earned during the term of the related contract, the creditworthiness of the client and, if applicable, termination for convenience fee payable by the client in the event that the client terminates the contract early.

During the third quarter of 2008, the Company recorded $272.9 of impairment and implementation charges, of which $207.5 was due to asset impairment and $65.4 was due to expensing of implementation costs that exceeded the termination for convenience fees in the contract at September 30, 2008. Based upon the contract profitability analysis completed in the third quarter of 2008 two HR Management contracts were projected to be unprofitable over their contract terms due to an increase in overall implementation and delivery costs. As a result, $207.5 of the capitalized costs related to these contracts were impaired, and were, therefore, written down in the quarter. After the write-off, one of the contracts is expected to be profitable over its remaining contract term and the other contract is expected to continue to generate losses. The losses from this executory contract will be recorded as incurred, over the contract term through 2016 in the Company’s Consolidated Statements of Operations and are not material to the Company’s Consolidated Financial Statements.

Further, during the third quarter of 2008, the costs of implementing another large HR outsourcing client exceeded the amount recoverable under the contract at September 30, 2008, even though the contract is expected to be profitable over its term. When implementation costs are deemed not recoverable in accordance with our accounting policy, we expense such excess costs even if the contract is profitable over its term. (See also “Deferred Charges” section of the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007 for more detailed discussions on deferred charges and the Company’s policy on assessing recoverability of deferred charges). The $65.4 charge is classified within the costs of providing services and products sold caption in the accompanying Consolidated Statements of Operations.

During the nine months ended September 30, 2008 and 2007, the Company capitalized $206.0 and $80.0, respectively, of client acquisition and implementation costs. The amortization and the impairment charge recorded during the nine months ended September 30, 2008 was $324.2 compared to $37.5 in the same period last year.

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The Company sponsors a defined benefit pension plan, which includes both a qualified and non-qualified portion, for all eligible employees (the cash balance plan). The Company also sponsors a non-qualified, unfunded executive deferred compensation plan and a supplemental, non-qualified, unfunded plan for certain senior executives (the executive pension plans). The pension benefit formula for the cash balance plan is determined by a combination of compensation and age-based credits and annual guaranteed interest credits. Benefits for the executive deferred compensation plan are based on employee deferrals, matching contributions and investment earnings on participant accounts. Benefits for the supplemental plan are based on age, years of service and eligible pay. Funding of the qualified portion of the cash balance plan has been achieved through contributions made to a trust fund. The contributions have been determined using the aggregate cost method. The Company’s measurement date for all plans is December 31. The projected unit credit cost method is used for determining the unfunded executive pension cost for financial reporting purposes. Pension costs for the cash balance plan are determined based on the traditional unit credit cost method. The plan assumptions are evaluated annually and are updated as necessary.

During the first quarter of 2008, the Company amended its cash balance plan to cease future benefit accruals and to close participation effective March 31, 2008. After March 31, 2008, participants will not earn future accruals or credits to their cash balance account with respect to compensation earned after March 31, 2008, but will continue to be credited with interest to their cash balance account. This plan amendment resulted in recognizing a curtailment loss of $4.0 during the first quarter of 2008.

Components of pension cost for the cash balance plan are as follows:

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Components of pension cost for the unfunded executive pension plans are as follows:

The Company contributed $13.5 to fund its cash balance plan during the third quarter of 2008.

During the nine months ended September 30, 2008, the Company repurchased 7.7 million shares of Convergys stock for a total cost of $116.6. There were no shares repurchased during the third quarter of 2008 and from October 1, 2008 through the date of filing this report. As of September 30, 2008, the Company may repurchase 7.1 million common shares pursuant to the available share repurchase authorizations.

From time to time, the Company is involved in various loss contingencies, including tax and legal contingencies, that arise in the ordinary course of business. At this time, the Company believes that the results of any such contingencies, either individually or in the aggregate, will not have a materially adverse effect on the Company’s financial condition. However, the outcome of any litigation cannot be predicted with certainty. An unfavorable resolution of one or more pending matters could have a materially adverse impact on the Company’s financial conditions in the future.

Several related class action lawsuits were filed in the United States District Court for the Northern District of Texas on behalf of purchasers of common stock of Intervoice during the period from October 12, 1999 through June 6, 2000 (the Class Period). Plaintiffs have filed claims, which were consolidated into one proceeding, under Sections 10(b) and 20(a) of the Exchange Act and SEC Rule 10b-5 against Intervoice as well as certain named current and former officers and directors of Intervoice on behalf of the alleged class members. In the complaint, Plaintiffs claim that Intervoice and the named current and former officers and directors issued false and misleading statements during the Class Period concerning the financial condition of Intervoice, the results of the merger with Brite and the alleged future business projections of Intervoice. Plaintiffs have asserted that these alleged statements resulted in artificially inflated stock prices.

The District Court dismissed the Plaintiffs’ complaint because it lacked the degree of specificity and factual support to meet the pleading standards applicable to federal securities litigation. The Plaintiffs appealed the dismissal to the United States Court of Appeals for the Fifth Circuit, which affirmed the dismissal in part and reversed in part. The Fifth Circuit remanded a limited number of issues for further proceedings in the District Court.

On September 26, 2006, the District Court granted the Plaintiffs’ motion to certify a class of people who purchased Intervoice stock during the Class Period. On November 14, 2006, the Fifth Circuit granted Intervoice’s petition to appeal the District Court’s decision to grant Plaintiffs’ motion to certify a class. On January 8, 2008, the Fifth Circuit vacated the District Court’s class-certification order and remanded the case to the District Court for further consideration in light of the Fifth Circuit’s decision in Oscar Private Equity Investments v. Allegiance Telecom, Inc. The parties filed additional briefing in the District Court regarding class certification and are awaiting the District Court’s ruling. The District Court granted Plaintiffs’ motion for leave to file a second amended complaint and Intervoice moved to dismiss portions of that amended complaint. On March 14, 2008, the District Court granted that motion in part and denied it in part. Intervoice has largely completed the production of documents in response to the Plaintiffs’ requests for production. The Company continues to vigorously defend the case.

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The Company leases certain equipment and facilities used in its operations under operating leases. This includes the Company’s office complex in Orlando, Florida, which is leased from Wachovia Development Corporation (Lessor), a wholly owned subsidiary of Wachovia Corporation, under an agreement that expires in June 2010. Upon termination or expiration of the lease, the Company must either purchase the property from the Lessor for $65.0 or arrange to have the office complex sold to a third party. If the office complex is sold to a third party for an amount less than $65.0, the amount paid by the Lessor for the purchase of the complex from an unrelated third party, the Company has agreed under a residual value guarantee to pay the Lessor up to $55.0. If the office complex is sold to a third party for an amount in excess of $65.0, the Company is entitled to collect the excess. At the inception of the lease, the Company recognized a liability of approximately $5.0 for the related residual value guarantee. The value of the guarantee was determined by computing the estimated present value of probability-weighted cash flows that might be expended under the guarantee. The Company recorded a liability for the fair value of the obligation with a corresponding asset recorded as prepaid rent, which is being amortized to rental expense over the lease term. The liability will remain on the balance sheet until the end of the lease term. Under the terms of the lease, the Company will also provide certain indemnities to the Lessor, including environmental indemnities. Due to the nature of such potential obligations, it is not possible to estimate the maximum amount of such exposure or the fair value. The Company does not expect such amounts, if any, to be material. The Company has concluded that it is not required to consolidate the Lessor pursuant to FASB Interpretation No. 46R, “Consolidation of Variable Interest Entities,” an interpretation of ARB No. 51.

At September 30, 2008, the Company had outstanding letters of credit of $46.5 related to performance and payment guarantees. The Company believes that any guarantee obligation that may arise will not be material.

The Company also has purchase commitments with telecommunications providers of approximately $9 for the remainder of 2008, $30 for 2009 and $24 for 2010.

As discussed in Note 1, the Company has three segments, which are identified by service offerings. Customer Management provides outsourced agent-assisted and self-service customer care solutions as well as consulting and technology solutions to the in-house market. Information Management provides business and operating support system solutions for the global communications industry. HR Management provides human resource business process outsourcing solutions, talent management and learning solutions. These segments are consistent with the Company’s management of the business and reflect its internal financial reporting structure and operating focus.

The Company does not allocate activities below the operating income level to its reported segments. The Company’s business segment information is as follows:

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The diluted EPS calculation for the three and nine months ended September 30, 2008 excludes the effect of dilutive securities because of the loss from continuing operations. The diluted EPS calculation for the nine months ended September 30, 2007 excludes the effect of 9.1 million outstanding stock options because they are anti-dilutive.

The Company has outstanding forward exchange contracts and options that mature within the next 48 months, consisting primarily of Canadian dollars, Indian rupees and Philippine pesos with a notional value of $966.4 at September 30, 2008 and $701.6 at December 31, 2007. All the derivative instruments discussed above are designated and effective as cash flow hedges. The following table reflects the fair value of the derivative instruments included within the Consolidated Financial Statements:

A total of $63.8 of deferred losses and $40.4 of deferred gains, net of tax, related to these cash flow hedges at September 30, 2008 and December 31, 2007, respectively, were accumulated in Other Comprehensive Income (Loss). Gains and losses on derivative contracts that are reclassified from accumulated Other Comprehensive Income to current period earnings are classified together with the hedged transactions in the Consolidated Statement of Operations as costs of providing services and products sold. As of September 30, 2008, deferred losses of $26.3 ($17.3 net of tax), on derivative instruments included in accumulated other comprehensive income are expected to be reclassified into earnings during the next 12 months.

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The Company also enters into derivative instruments (forwards) to economically hedge the foreign currency impact of assets and liabilities denominated in nonfunctional currencies. During the nine months ended September 30, 2008, a loss of $3.8 was recognized related to changes in fair value of these derivative instruments not designated as hedges, compared to a $1.5 gain for the same period in 2007. The losses largely offset the currency gains that resulted from changes in the assets and liabilities denominated in nonfunctional currencies. These gains and losses are classified within Other Income, net in the accompanying Consolidated Statements of Operations. During the first quarter of 2008, the Company had entered into treasury lock derivative instruments with a total notional amount of $200.0 in anticipation of a probable debt issuance later in 2008. The treasury lock was terminated during the second quarter of 2008 and the gain on the termination was recorded within accumulated Other Comprehensive Income of the Consolidated Financial Statements at June 30, 2008. In the current financial market conditions, the Company does not expect to issue debt in the near future, therefore, the $6.0 gain on termination of the treasury lock is recognized within the Other Income, net in the accompanying Consolidated Statements of Operations at September 30, 2008.

The Company’s board of directors and senior management team are evaluating a potential separation of the Information Management segment from Convergys to create two independent, publicly traded companies, each focused on its own set of business opportunities. The board has retained a third party financial advisor to assist them in this process. Given the current economic and financial markets, the board of directors and senior management of the Company will provide an update regarding the evaluation in the first quarter of 2009.

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