BACKGROUND

Convergys Corporation (the Company or Convergys) is a global leader in relationship management. We provide solutions that drive more value from the relationships our clients have with their customers and employees. Convergys turns these everyday interactions into a source of profit and strategic advantage for our clients. For 25 years, our 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.

We report three segments: (i) Customer Management, which provides outsourced customer care solutions as well as professional and consulting services to in-house customer care operations; (ii) Information Management, which provides convergent rating, charging and billing solutions for the global communications industry; and (iii) HR Management, which provides human resource business process outsourcing solutions 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.

Customer Management

Our Customer Management segment manages customer relationships on behalf of our clients through our multi-channel customer management contact centers and through consulting engagements. Phone and web-based agent-assisted service channels provide customers with assistance across the entire customer lifecycle. We deliver these services using a variety of tools including computer telephony integration, interactive voice response, advanced speech recognition, knowledge-based management and the Internet through agent-assisted and self-service channels.

Customer Management typically recognizes agent-related revenues as services are performed based on staffing hours or the number of contacts handled by service agents using contractual rates. In a limited number of engagements where the client pays a fixed fee, we recognize revenues based on the specific facts and circumstances of the engagement, using the proportional performance method or upon final completion of the engagement. We sometimes earn supplemental revenues depending on our satisfaction of certain service levels or achievement of certain performance measurement targets. The supplemental revenues are recognized only after the required measurement targets are met. Collection-related services revenue are recognized in the month collection payments are received based on a percentage of cash collected or other contractual parameters. Revenues for professional and consulting services are recognized as the services are performed or upon final completion of the engagement based on the specific facts and circumstances of the engagement.

During the first six months of 2008, Customer Management's revenues increased 2% to $945.0 compared to the prior year. Customer Management's operating income and operating margin were $41.3 and 4.4%, respectively, compared with $101.0 and 10.9% in the prior year. The price and volume increase with several of our largest clients was more than offset by approximately $19 of additional expenses due to the weakened U.S. dollar and continued investment to support anticipated future growth.

In July 2008, we signed a definitive merger agreement to acquire 100% of Intervoice Inc., a developer of automated voice response systems, for $335 in cash or $8.25 per share. Integration of Intervoice, Inc.'s speech automation, web self-care and mobile applications with an array of our automated and live agent services will enable us to fully participate in our clients' growing use of call handling automation strategies. We expect this acquisition to close in the third quarter of 2008.

Information Management

Our Information Management segment serves clients principally by providing and managing complex billing and information software that addresses all segments of the communications industry. We provide our software products in one of three delivery modes: licensed, outsourced or build-operate-transfer (BOT). In the licensed delivery mode, the software is licensed to clients who perform billing internally. In the outsourced delivery mode, Information Management provides the billing services by running its software in one of its data centers. Under the BOT delivery mode, Information Management implements and initially runs its software in the client's data center while the client has the option to transfer the operation of the center to itself at a future date.

During the first six months of 2008, Information Management's revenue was $324.3, a 12% decline compared to the prior year mainly due to the anticipated negative impact of North American client migrations. License and related support and maintenance fees, which accounted for 37% of Information Management's revenues for the first six months of 2008, are earned under perpetual and term license arrangements. The Company invoices its clients for licenses either up-front or monthly based on the number of subscribers, events or units processed using the software. Fees for support and maintenance normally are charged in advance either on an annual, quarterly or monthly basis. Professional and consulting services for installation, implementation, customization, migration, training and managed services accounted for 39% of Information Management's revenues for the six months ended June 30, 2008. The professional and consulting fees are either invoiced monthly to the Company's clients based on time and material costs incurred at contractually agreed upon rates or, in some instances, for a fixed fee. Information Management's remaining revenues consist of monthly fees for processing client transactions in Information Management's data centers and, in some cases, the clients' data centers, using Information Management's proprietary software. These data processing revenues are recognized based on the number of invoices, subscribers or events that are processed by Information Management using contractual rates. Information Management's operating income and operating margin for the first six months of 2008 were $67.4 and 20.8%, respectively, compared with $63.7 and 17.2%, respectively, in the prior year. This significant improvement resulted from continued focus on cost management, including more focused investment in new product capabilities.

Information Management continues to face competition as well as consolidation within the communications industry. In December 2006, AT&T and Bell South Corporation (Bell South) merged. Prior to the merger, Cingular (a joint venture between AT&T and Bell South) was our largest client in terms of revenue. As a result of the merger, AT&T is now our largest client in terms of revenue. We have assisted AT&T with its strategy to migrate subscribers off of the AT&T Wireless billing systems (that we supported) onto AT&T's two systems (one of which we support through a managed services agreement). The migration was completed during early 2007. In January 2008, AT&T informed us that it intends to migrate its subscribers from the system that we currently support through a managed services agreement onto AT&T's other system over the next two years. While the migration is subject to change, we anticipate that this will result in a loss of revenue of an amount equal to approximately 4% and 3% of our 2007 Information Management revenues in 2009 and 2010, respectively. The impact of this migration on our 2008 revenues is negligible. We do not expect this migration to have a material impact on our liquidity and capital resources.

In September 2005, Sprint PCS, a large data processing outsourcing client, completed its acquisition of Nextel Communications. In 2006, Sprint Nextel informed us that it intended to consolidate its billing systems onto a competitor's system. The migration began in 2006 and was substantially completed by the end of June 30, 2008. Revenues from Sprint Nextel were down 19% in the first half of 2008 compared to the corresponding period last year. We expect revenue from Sprint Nextel to be down by approximately 50% for the twelve months ended December 31, 2008, compared to prior year.

During the second quarter of 2008, we made two small strategic acquisitions to expand our business support systems solution footprint: Shanghai Hong Xun Software Co., Ltd. for its web self-care, service provisioning, and workforce management capabilities and Visage's Subscriber Management Platform.

Human Resource Management

Our Human Resource Management (HR Management) segment provides a full range of human resource business processing outsourcing solutions including benefits administration, compensation, human resource administration, learning, payroll administration, performance management, recruiting and sourcing services to large companies and governmental entities. We take advantage of our economies of scale in order to standardize human resource processes across departments, business lines, language differences and national borders. For 25 years, our 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.

During the past few years, we have transformed HR Management into a leading player in the growing human resource outsourcing market. In connection with our efforts to grow the business and build a global infrastructure of human resource expertise and know-how, we have incurred significant start-up costs. Furthermore, despite our success in winning long-term outsourcing arrangements with several clients, the sales cycles for these arrangements have ranged from 12 to 24 months. For these reasons, coupled with the fact that we are in the early stages with many of our outsourcing arrangements, where margins tend to be lower, we have generated significant operating losses over the past few years.

During the first six months of 2008, HR Management's revenues increased 7% to $136.6 compared to the prior year. HR Management's operating loss was $9.1 compared to a loss of $24.5 in the prior year. Last year results included expensing $6.1 in implementation costs related to a large HR BPO contract. The improvement in operating loss also reflects solid management of selling, general and administrative expenses in the first half of 2008.

FORWARD-LOOKING STATEMENTS

This report contains "forward-looking" statements, as defined in the Private Securities Litigation Reform Act of 1995, which are based on current expectations, estimates and projections. Statements that are not historical facts, including statements about the beliefs and expectations of the Company, are forward-looking statements. Sometimes these statements will contain words such as "believes," "expects," "intends," "could," "should," "will," "plans," "anticipates" and other similar words. These statements discuss potential risks and uncertainties; and, therefore, actual results may differ materially. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they were made. The Company expressly states that it has no current intention to update any forward-looking statements, whether as a result of new information, future events or otherwise. See the discussion under the "Risks Relating to Convergys and Its Business" section of Management Discussion and Analysis.

RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the condensed consolidated financial statements and segment data. Detailed comparisons of revenue and expenses are presented in the discussions of the operating segments, which follow the consolidated results discussion. Results for interim periods may not be indicative of the results for the full years.

CONSOLIDATED RESULTS



                                               Three Months                                   Six Months
                                              Ended June 30,                                Ended June 30,
                                       2008        2007       Change       %        2008          2007        Change       %
Revenues                              $ 689.5     $ 707.0     $ (17.5 )    (2 )   $ 1,405.9     $ 1,426.9     $ (21.0 )    (1 )
Cost of Providing Services and
Products Sold                           459.6       461.6        (2.0 )    (1 )       931.6         920.4        11.2       1
Selling, General and Administrative     139.7       137.1         2.6       2         289.9         281.8         8.1       3
Research and Development Costs           11.7        19.6        (7.9 )   (41 )        22.3          38.7       (16.4 )   (43 )
Depreciation                             29.1        28.4         0.7       2          57.8          58.3        (0.5 )    (1 )
Amortization                              2.0         2.2        (0.2 )    (9 )         3.9           4.4        (0.5 )   (11 )
Restructuring Charges                      -           -           -       -           14.1            -         14.1      -

Total Costs and Expenses                642.1       648.9        (6.8 )    (1 )     1,319.6       1,303.6        16.0       1

Operating Income                         47.4        58.1       (10.7 )   (18 )        86.3         123.3       (37.0 )   (30 )
Equity in Earnings of Cellular
Partnerships                             11.3         3.6         7.7      -           18.1           5.6        12.5      -
Other Income (Expense), net              (0.8 )       0.5        (1.3 )    -           (1.9 )         2.7        (4.6 )    -
Interest Expense                         (4.0 )      (4.6 )       0.6     (13 )        (7.8 )        (9.4 )       1.6     (17 )

Income Before Income Taxes               53.9        57.6        (3.7 )    (6 )        94.7         122.2       (27.5 )   (23 )
Income Taxes                             13.4        18.8        (5.4 )   (29 )        18.3          39.8       (21.5 )   (54 )

Net Income                            $  40.5     $  38.8     $   1.7       4     $    76.4     $    82.4     $  (6.0 )    (7 )
Diluted earnings per common share     $  0.32     $  0.28     $  0.04      14     $    0.60     $    0.59     $  0.01       2
Operating Margin                          6.9 %       8.2 %                             6.1 %         8.6 %

Three Months Ended June 30, 2008 versus Three Months Ended June 30, 2007

Consolidated revenues for the second quarter of 2008 were $689.5 compared to $707.0 in the prior year. The revenue decline was largely due to anticipated client migrations in Information Management. Operating income for the second quarter of 2008 decreased 18% to $47.4 compared with $58.1 in the prior year. The significant improvement in the HR Management operating loss was more than offset by declines at Customer Management primarily due to the negative impact from the weakened U.S. dollar as well as increased investment to support anticipated future growth. Operating income at Information Management was relatively flat compared to the prior year. Second quarter 2008 diluted earnings per share was $0.32, a 14% increase from the prior year. Strong contribution from the cellular partnerships, a lower tax rate, and an impact of share repurchase program helped offset anticipated operating challenges.

As a percentage of revenues, costs of products and services were 66.7% compared to 65.3% during the corresponding period last year. This reflects an increase in costs of products and services as a percentage of revenues both at Customer Management and Information Management, partially offset by lower costs of products and services as a percentage of revenues at HR Management. Selling, general, and administrative expenses of $139.7 increased 2% from the second quarter of 2007. As a percentage of revenues, selling, general and administrative expenses were 20.3% in the second quarter of 2008 compared to 19.4% in the same period last year. The increase was due to higher selling, general, and administrative expenses at Customer Management, reflecting additional capacity expansion and labor costs. The 41% decrease in research and development costs mostly reflects reduced spending at Information Management. We are being selective in our approach to research and development spending, focusing our efforts on only the highest impact areas. We are also adding some development efforts in Asia and acquiring technology through product partnerships and small acquisitions.

During the second quarter of 2008, we recorded equity income in the Cellular Partnerships of $11.3 compared to equity income of $3.6 in the prior year. Our effective tax rate was 24.9% for the three months ended June 30, 2008 compared to 32.6% in the same period last year. The lower tax rate for the second quarter of 2008 was primarily due to improvements in profitability of our international operations.

During the three and six months ended June 30, 2008, the Company repurchased 3.5 million and 7.7 million shares, respectively, of Convergys stock.

As a result of the forgoing, second quarter 2008 net income and earnings per diluted share were $40.5 and $0.32, respectively, compared with $38.8 and $0.28, respectively, in the second quarter of 2007.

Six Months Ended June 30, 2008 versus Six Months Ended June 30, 2007

Consolidated revenues for the first six months of 2008 were $1,405.9 compared to $1,426.9 in the prior year. Growth in revenues from HR Management and Customer Management partially offset an anticipated decline in Information Management. Operating income for the first half of 2008 decreased 30% to $86.3 compared with $123.3 in the prior year. The improvements at HR Management and at Information Management were more than offset by declines at Customer Management primarily due to the negative impact from the weakened U.S. dollar as well as increased investment to support anticipated future growth. Operating income for the first half of 2008 also includes a $14.1 restructuring charge taken to better align cost structure to business needs.

As a percentage of revenues, costs of products and services were 66.3% compared to 64.5% during the corresponding period last year. This reflects an increase in costs of products and services as a percentage of revenues at Customer Management, partially offset by lower costs of products and services as a percentage of revenues both at Information Management and HR Management. Selling, general, and administrative expenses of $289.9 increased 3% compared to the first half of 2007. As a percentage of revenues, selling, general and administrative expenses were 20.6% in the first half of 2008 compared to 19.7% in the same period last year. The increase was due to higher selling, general and administrative expenses at Customer Management, reflecting additional capacity expansion and labor costs. The 43% decrease in research and development costs largely reflects reduced spending at Information Management. We are being selective in our approach to research and development spending, focusing our efforts on only the highest impact areas. We are also adding some development efforts in Asia and acquiring technology through product partnerships and small acquisitions.

As discussed more fully under the heading, "Restructuring Charges," we recorded a restructuring charge of $14.1 during the first quarter of 2008. In addition, operating income for the first half of 2008 was positively impacted by a decrease of $6.5 in long-term incentive plan expense recorded at Corporate primarily reflecting the impact of our recent share price performance.

During the first half of 2008, we recorded equity income in the Cellular Partnerships of $18.1 compared to equity income of $5.6 in the prior year. Interest expense of $7.8 decreased from $9.4 in the prior year primarily reflecting a lower level of debt. Our effective tax rate was 19.3% for the six months ended June 30, 2008 compared to 32.6% in the same period last year. The lower tax rate for the first half of 2008 was due to an $8.2 favorable impact from the resolution of tax audits during the first quarter of 2008 as well as improved profitability of our international operations.

As a result of the forgoing, net income and earnings per diluted share for the first half of 2008 were $76.4 and $0.60 compared with $82.4 and $0.59 in the first half of 2007.

Effective January 1, 2008, we adopted SFAS No. 157, "Fair Value Measurements" and EITF 06-04, "Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split Dollar Life Insurance Arrangements." Refer to Notes 2 and 5 to the Notes to Consolidated Financial Statements for details related to the adoption of these Standards. The adoption of these Standards did not have any impact on our Consolidated Statements of Income.

CUSTOMER MANAGEMENT



                                                 Three Months                                 Six Months
                                                Ended June 30,                              Ended June 30,
                                         2008        2007       Change       %       2008        2007       Change       %
Revenues:
Communications                          $ 275.3     $ 267.1     $   8.2       3     $ 552.0     $ 527.4     $  24.6       5
Technology                                 38.3        37.5         0.8       2        76.8        80.2        (3.4 )    (4 )
Financial services                         57.2        64.7        (7.5 )   (12 )     118.5       133.8       (15.3 )   (11 )
Other                                      98.2        91.3         6.9       8       197.7       188.2         9.5       5

Total revenues                            469.0       460.6         8.4       2       945.0       929.6        15.4       2
Cost of products and services             326.6       308.2        18.4       6       649.0       611.9        37.1       6
Selling, general and administrative
expenses                                  107.2        92.4        14.8      16       217.7       185.4        32.3      17
Research and development costs              0.9         1.1        (0.2 )   (18 )       1.9         2.5        (0.6 )   (24 )
Depreciation                               14.4        13.6         0.8       6        28.7        27.6         1.1       4
Amortization                                0.5         0.6        (0.1 )   (17 )       1.0         1.2        (0.2 )   (17 )
Restructuring charges                        -           -           -       -          5.4          -          5.4      -

Total costs                               449.6       415.9        33.7       8       903.7       828.6        75.1       9

Operating Income                        $  19.4     $  44.7     $ (25.3 )   (57 )   $  41.3     $ 101.0     $ (59.7 )   (59 )
Operating Margin                            4.1 %       9.7 %                           4.4 %      10.9 %

Three Months Ended June 30, 2008 versus Three Months Ended June 30, 2007

Revenues

Customer Management's revenues were $469.0, a 2% increase from the second quarter of 2007. Revenues from the communication services vertical increased 3% from the second quarter of 2007, reflecting growth with large wireless clients, partially offset by a reduction in spending from two large communication clients due to improvements in their operations and service delivery. Revenues from the financial services vertical decreased 12%, reflecting both completion of programs with clients as well as weakness in the financial services sector during the second quarter of 2008. Other revenues, which are comprised of clients outside of Customer Management's three largest industries, increased 8% from the second quarter of 2007 largely reflecting growth from new programs.

Costs and Expenses

Customer Management's total costs and expenses were $449.6, an 8% increase from the second quarter of 2007. Customer Management's costs of products and services during the second quarter of 2008 increased 6% to $326.6 from the second quarter of 2007. As a percentage of revenues, costs of products and services were 69.6%, up 270 basis points from the prior year. The impact of price and volume increases with clients were more than offset by an approximately 250 basis point negative impact resulting from the weakened U.S. dollar as well as increased labor costs. Selling, general and administrative expenses of $107.2 in the second quarter of 2008 increased 16% compared to the prior year. This primarily reflects higher costs from continued investments in infrastructure, capacity and sales resources to support anticipated future growth. Selling, general and administrative expenses in the second quarter of 2008 also includes an approximately 50 basis point negative impact resulting from the weakened U.S. dollar. As a percentage of revenues, selling, general and administrative expenses were 22.9% in the second quarter of 2008 compared to 20.1% in the same period last year.

Operating Income

As a result of the forgoing, Customer Management's second quarter 2008 operating income and margin were $19.4 and 4.1%, respectively, compared to $44.7 and 9.7%, respectively, in the second quarter of 2007.

Six Months Ended June 30, 2008 versus Six Months Ended June 30, 2007

Revenues

Customer Management's revenues were $945.0, a 2% increase from the first half of . . .