IRESS LIMITED — Capital/Financing Update 2013

Aug 5, 2013

NEWS RELEASE

6 AUGUST 2013, MELBOURNE

ACQUISITION OF AVELO FINANCIAL SERVICES

LEADING TECHNOLOGY PROVIDER IN THE UK

2 FOR 9 ENTITLEMENT OFFER ($206M)

IRESS Limited (“IRESS”) today announced that it will acquire Avelo FS Holdings Limited (“Avelo”), a leading provider of financial services technology in the UK for a purchase price of £210 million in cash.

KEY HIGHLIGHTS

 IRESS to acquire Avelo for a cash purchase price of £210m[1]

• Consistent with IRESS’ existing growth strategy

• Compelling opportunity for market leading revenue footprint in the UK

• Avelo management team and key staff retained

 Funded by combination of internal cash resources, new debt, and an entitlement offer

 Expected to be more than 10% EPS accretive in calendar year 2014[2]

 Completion conditional on FCA regulatory approval and Avelo making certain accounting adjustments[3]

OVERVIEW OF AVELO

Avelo is a leading independent technology provider in the UK with a comprehensive product suite, clients spanning the entire financial services value chain, and an industrial technology capability for mortgage origination and processing.

Avelo has a long and successful history in financial services technology in the UK, incorporating The Exchange Portal ‐ the longstanding and leading online platform for quotes and applications on life and health protection, pensions, investments, mortgage and general insurance. Over the past five years, Avelo has combined organic and inorganic growth, including acquisitions of N4 Solutions, Screen Business and most recently, Trigold.

Avelo’s Wealth Management business mirrors IRESS’ existing segment and provides software solutions to a long‐standing blue chip client base spanning 35,000 users, financial advisers and brokers, including 93 of the top 100 IFA firms in the UK.

Avelo’s Enterprise Solutions business provides large‐scale software solutions for mortgage origination and distribution to some of the UK’s largest banks and building societies.

Avelo is being sold by a private investor consortium, including LDC (part of Lloyds Banking Group), Vertex and Avelo management.

1 Based on an AUD/GBP exchange rate of 0.5821 as at 5‐Aug‐2013, the purchase price is equal to approximately $360 million. Excludes transaction costs for the acquisition of $16 million, of which approximately $7 million associated with the entitlement offer will be capitalised and the remaining balance will be expensed in 2013. Purchase price is subject to completion adjustments.

2 EPS accretion applies to both reported and underlying EPS, driven by the expected growth in Avelo earnings, the funding structure utilised and the phased benefit of estimated synergies of $3‐4 million p.a.

3 Under the UK’s Financial Services and Markets Act 2000, IRESS, as a proposed controller of Avelo Portal Limited (“APL”), a subsidiary of Avelo, must obtain approval from the UK Financial Conduct Authority (“FCA”) before acquiring control over APL. Accounting adjustments to be made by Avelo in line with IRESS’ accounting policy.

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STRATEGIC HIGHLIGHTS

This acquisition will significantly diversify IRESS’ geographic and segment exposure, accelerating revenue opportunities in the UK through combined product strength and scale capability.

IRESS CEO, Andrew Walsh said “This is a unique and attractive opportunity to establish scale, revenue and relationship footprint in the UK. Avelo has a strong strategic fit with our wealth management business and significantly builds upon our organic success in the UK. It also introduces mortgage sourcing and distribution technology strength that will expand IRESS’ capabilities within financial services.”

Regulatory change in the UK is stimulating demand for technology solutions that address increased compliance burdens, inefficiencies, and that help realise resulting business opportunities. Key reforms include the Retail Distribution Review, the National Employment Savings Trust, and the Mortgage Market Review ‐ each of which foster technology responses. The combined product breadth and strength of IRESS and Avelo will uniquely position IRESS with scale to accelerate these opportunities.

IRESS Chairman, Peter Dunai said “the acquisition of Avelo represents a compelling growth opportunity within the UK that is consistent with our growth strategy and combines product and geographic strengths. The IRESS Board is unanimous in their view that the combined business will benefit from increased scale and extended product capabilities.”

FINANCIAL HIGHLIGHTS

IRESS is acquiring Avelo for a total cash purchase price of £210 million.[4]

Attractive UK borrowing costs in the current market have compelled the modest introduction of debt into the capital structure and will be used alongside existing cash on balance sheet and a $206 million fully underwritten pro‐rata accelerated renounceable entitlement offer (“AREO”). IRESS will remain strongly capitalised with a pro forma net debt to segment profit ratio of approximately 1.1x[5] , maintaining significant balance sheet flexibility. Following the acquisition of Avelo, IRESS’ dividend policy is not changed.

The transaction is expected to deliver attractive financial outcomes and be more than 10% EPS accretive in 2014. IRESS expects to realise cost synergies of approximately $3‐4 million p.a., fully realised in 2015 through technology platform alignment, enhanced scale and the absorption of IRESS’ investment level in the UK. One off pre‐tax implementation costs of approximately $5 million will be predominantly incurred over the next two years and one‐off transaction fees of approximately $9 million (pre‐tax) will be expensed in 2013 and a further approximately $7 million associated with the entitlement offer will be capitalised.

INTEGRATION AND IMPLEMENTATION

IRESS CEO, Andrew Walsh will directly oversee the successful integration of Avelo in the UK, ensuring key implementation milestones occur as scheduled, and strategic initiatives are implemented. For the duration of the integration period, an Oversight and Advisory Committee will be established in the UK to manage implementation streams and areas of responsibility.

Post acquisition, the current Avelo CEO, Simon Badley, will assume the role of IRESS UK Managing Director, reporting directly to Andrew Walsh. The current IRESS UK Managing Director, Mark Thelwell, will be

4 Based on an AUD/GBP exchange rate of 0.5821 as at 5‐Aug‐2013. Purchase price is subject to completion adjustments. 5 IRESS considers inter‐period comparability of results is best presented as the underlying operating results of the relevant businesses calculated excluding share based payments, non‐recurring items, and strategic amortisation charges (“Segment Profit “) and has presented results consistently in this way for the past 8 years. Includes acquisition adjustments for Avelo using a historical average exchange rate over the period ending 31‐Mar‐2013 of AUD/GBP of 0.6529, excluding any synergy benefits or implementation costs.

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responsible for XPLAN strategic positioning and the delivery of commitments. Avelo’s key management and staff have been retained.

About the transaction, Simon Badley said “this is an exciting evolution for the Avelo business that will combine the strength and presence of two leading technology businesses to establish an even stronger foundation from which to grow.”

Andrew Walsh added that “IRESS’ focussed commitment is to both its clients and staff, and we look forward to welcoming many new partnerships arising from the acquisition of Avelo.”

APPROVALS

As part of this acquisition, IRESS will require approval from the Financial Conduct Authority (“FCA”) in relation to a subsidiary of Avelo that is authorised by the FCA and is subject to Avelo making certain accounting adjustments in line with IRESS’ accounting policy.

ACCELERATED RENOUNCEABLE ENTITLEMENT OFFER

As part of the transaction, IRESS has announced a 2 for 9 fully underwritten AREO to raise approximately $206 million. The offer will be priced at $7.15 per new share, which is a 10.1% discount to dividend adjusted TERP of $7.96[6] and a 12.1% discount to the dividend adjusted last closing price of $8.135[7] .

New Shares issued as part of the entitlement offer will not be eligible for the 2013 interim dividend of $0.135, but will otherwise rank equally in all respects with existing shares from the date of allotment.

IRESS’ largest shareholder, ASX Limited, has committed to take up its full entitlement at the offer price. In consideration for this commitment, Goldman Sachs will pay ASX a 1.5% commitment fee on the subscription amount for its entitlement.

The Institutional Entitlement Offer will be open from 9.00am (Melbourne Time) Tuesday, 6 August 2013 to 2:00pm (Melbourne Time) Wednesday, 7 August 2013. Eligible institutional shareholders can choose to take up all, part or none of their Entitlement. Institutional entitlements not taken up by eligible institutional shareholders by the close of the Institutional Entitlement Offer, and entitlements of ineligible institutional shareholders will be sold through the Institutional Shortfall Bookbuild to be conducted on Thursday, 8 August 2013. The Retail Entitlement Offer will open on Monday, 12 August 2013 and close on Thursday, 29 August 2013. Retail entitlements not taken up and entitlements of ineligible retail shareholders will be sold through the Retail Shortfall Bookbuild to be conducted on Tuesday, 3 September 2013.

6 The Theoretical Ex‐Rights Price (“TERP”) is the theoretical price at which IRESS shares should trade immediately after the ex‐date for the entitlement offer. The TERP is a theoretical calculation only and the actual price at which IRESS shares trade immediately after the ex‐date entitlement offer will depend on many factors and may not equal the TERP. TERP is calculated by reference to IRESS’s closing price of $8.27 on 5‐Aug‐2013 and deducting the 2013 interim dividend of $0.135 to reflect the fact that New Shares will not be entitled to receive this dividend payment.

7 Based on the closing price on 5‐Aug‐2013 of $8.27 and deducting the 2013 interim dividend of $0.135 to reflect the fact that New Shares will not be entitled to receive this dividend payment.

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Offer Timetable	Date
Trading Halt; Institutional Entitlement Offer Opens	Tuesday, 6 August 2013
Institutional Entitlement Offer Closes	Wednesday, 7 August 2013
Institutional Shortfall Bookbuild	Thursday, 8 August 2013
Record Date for Eligibility in the Entitlement Offer (7:00pm Melbourne Time)	Friday, 9 August 2013
Retail Entitlement Offer Opens	Monday, 12 August 2013
Dispatch of Retail Offer Booklet	Thursday, 15 August 2013
Record date for entitlement to 2013 interim dividend	Monday, 19 August 2013
Institutional Entitlement Offer Settlement	Monday, 19 August 2013
Issue and Quotation of New Shares under the Institutional Entitlement Offer	Tuesday, 20 August 2013
Retail Entitlement Offer Closes (5:00pm Melbourne Time)	Thursday, 29 August 2013
Retail Shortfall Bookbuild	Tuesday, 3 September 2013
Settlement of the Retail Entitlement Offer	Monday, 9 September 2013
Issue of New Shares under the Retail Entitlement Offer	Tuesday, 10 September 2013
New Shares under the Retail Entitlement Offer Commence Trading on ASX	Wednesday, 11 September 2013
Retail premium (if any) despatched	Thursday, 12 September 2013

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ADVISERS

Goldman Sachs is acting as exclusive financial adviser to IRESS in relation to the acquisition of Avelo, sole lead manager and underwriter of the entitlement offer, sole mandated lead arranger, underwriter and bookrunner of the acquisition debt facilities and will act as a hedge counterparty to IRESS. King & Wood Mallesons is acting as Australian law legal adviser to IRESS in relation to the acquisition, entitlement offer and debt financing. SJ Berwin is acting as English law legal adviser to IRESS in relation to the acquisition.

CONFERENCE CALL

IRESS welcomes investors and analysts to participate in a conference call at 10:30am AEST on Tuesday, 6 August 2013 to be hosted by Chairman Peter Dunai, CEO Andrew Walsh, and CFO Stuart Bland.

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Australia	1800 157 000
International	+61 2 8223 9380
UK	0800 085 5171 / 0207 365 4165
New Zealand	0800 447 965 / 09 912 1113
Hong Kong	30021675
Singapore	68232167
Participant Passcode	“market”

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For more information, please contact: Andrew Walsh Stu Bland IRESS, CEO IRESS, CFO awalsh@iress.com sbland@iress.com (W) +61 3 9018 5800 (W) +61 3 9018 5800

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