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Chairman's report

MFS New Zealand Limited

MFN

28 Sep, 2007, 10:14

ADDRESS

Chairman's & CEO's AGM Address

Good morning ladies and gentleman, my name is Mark Lacy and in accordance with the company constitution as Chairman of the Board of MFS New Zealand Limited, I will chair the Annual General Meeting, it is now the appointed time for the meeting and as a quorum is present, I formally declare the meeting open.
I would like to formally introduce Mr Jason Maywald, who is an executive director on the Board and CEO of MFS New Zealand. Unfortunately Mr Grant Herbert is unable to join us for today's meeting due to a family member falling ill. We are also joined today by our Chief Financial Officer Andre Gaylard, and our Chief Operating Officer, Stephen Hill.
MFS New Zealand listed on the New Zealand Stock Exchange in its current form just three months ago.

Prior to then the company, then known as Vistron Limited, was listed on the NZAX solely for the purpose of being used as a reverse listing vehicle. Accordingly, the 31 March 2007 financial accounts for the company relate to the activities of Vistron Limited, and bear no resemblance to the activities and operations of MFS New Zealand today.

Our stated intention is to evolve MFS New Zealand into a significant player in the New Zealand financial services sector. Jason will be speaking more about this, but in summary the outlook for the achievement of that goal is very bright and the opportunities available to the company are many.

The directors, management and staff of MFS New Zealand are looking forward to an exciting and challenging year ahead.

I would like to thank our shareholders, investors and their advisors for their support. You can be assured that we remain committed to the growth and profitability of your company.

I also express my heartfelt thanks to all of the staff of MFS New Zealand. For without your dedication, loyalty and hard work we would not be so successful. I will now hand proceedings over to our CEO, Jason Maywald.

Thank you Mark.

The future of our business is indeed bright and the opportunities available to us are extensive. I think it is fair to say that our staff are very enthusiastic about our business and what we have set out to achieve.

So what are we looking to achieve?

The New Zealand financial services sector is characterised by large overseas companies, numerous privately owned financial planning firms, merchant banks, finance companies, fund managers, share brokers and a few NZX listed companies with a fairly narrow focus.

The future of the New Zealand financial services industry is the creation of a significant diversified New Zealand financial services provider. A company which invests in, operates in, and employs in, New Zealand. An NZX listed company in which every New Zealander has the opportunity to own shares.

We have recognised that opportunity and that is what MFS New Zealand is here to achieve.

The key to success in investment and likewise in the business of financial services is diversification.

History has shown us that businesses with a narrow or singular focus are very vulnerable to changing markets. Diversification of funding, revenue streams and assets are all desirable traits in a business and all provide varying layers of insulation when markets change.

The other key to success in financial services is scale.

Financial services is an expensive business. Hiring and retaining the best people is not cheap, nor is managing the investment portfolios of thousands of investors.

As a participant in this market we welcome any action that will lead to a rationalisation of the financial services industry. We welcome and applaud the steps being taken by the government towards greater regulation of the sector, but we also note that history both here and overseas has shown that a product rating does not prevent the failure of a company or an investment product.

What we have also learnt from our experience in Australia is that increased regulation brings with it increased costs of compliance - costs that many smaller businesses can not afford.

So, the business of financial services is expensive, and the cost of doing business will only increase, but scale brings with it the ability to absorb and manage all of those costs.

The second benefit of scale is the ability to leverage off of the resources and expertise of other businesses within an organisation. That leverage means that an individual business within a group does not always have to look into itself for the resources it needs to grow and prosper. This means that irrespective of the market an individual business has the ability to continue to develop and grow.

Without diversification and without scale a financial services business will only ever be able to operate at a certain level and will always be vulnerable to a change in the market, regardless of how many ratings it has.

We seek diversification and scale for MFS New Zealand.

MFS New Zealand is designed to evolve into a significant NZX listed diversified financial services provider. Our intention is to invest in, operate in, and employ in, New Zealand.

Our objective is for MFS New Zealand to own a range of businesses operating in the funds management, financial advisory, investment banking and property structured finance sectors. We listed three months ago with that sole purpose in mind and we have put in place mechanisms for that to be achieved.

MFS New Zealand holds an Option to acquire a range of financial services businesses including:-

o MFS Boston Limited: a very well managed finance company with a high quality loan book. We see huge opportunity for Boston, and we expect it to be the first of a new generation of income product and one that will lead the market as it shifts away from the traditional finance company business model;

o Vestar Investment Specialists: one of New Zealand's largest and most professionally run financial advisory businesses. Vestar has 14 offices across the country and manages circa $1billion for around 6,000 clients. MFS created Vestar through the merger of five individual planning firms, it has entirely restructured and changed the way those firms operated and we are confident that Vestar will lead the financial advisory market in New Zealand. Interest among advisory firms wishing to join the Vestar family has been very strong and so there exist many opportunities to expand that business;

o The GTF Group: a group of highly skilled, well respected and very professional structured finance arrangers and brokers;

o miCentre: a company which provides cost effective and efficient management of back office and portfolio administration services to financial planners and fund managers. The potential for this business is huge; and,

o Strategic shareholdings in two special purpose funds management companies, each of which have the potential to be significant businesses in their own right.

In time the directors of MFS New Zealand will decide whether or not to exercise that Option and acquire those businesses. If those businesses were to be acquired today it would transform MFS New Zealand into a company with diversified revenue streams, over $1.5billion in funds under management and under advice, over 100 staff, 15 offices and a client and investor base of circa 20,000.

It is then upon that foundation that our business would further diversify and continue to grow.

When MFS first started operating in New Zealand in 2003 we said to investors don't invest in finance companies that solely lend on New Zealand property, cars, household goods or consumer finance.

We said invest in the larger and more diversified Australian property market.

We said invest with companies that have the ability to leverage off of the scale, resources and expertise of a larger organisation like MFS.

That is what our subsidiary MFS Pacific Finance Limited has done, and since 2003 that business has grown significantly and today it manages over $340million for circa 12,000 investors.

Today the New Zealand financial services industry is suffering a turbulent and challenging time. But our business remains well positioned to grow because we can leverage off of the scale and resources of MFS Limited.

To give some context to the scope of that; MFS Limited is a large and diversified financial services, investment and tourism company that is currently listed in the top 200 companies on the Australian Stock Exchange. MFS Limited recently announced a second successive record full-year net profit after tax of AU$185 million in the 12 months ended 30 June 2007, net assets in excess of AU$1.53 billion and total assets under management of approximately AU$5.26 billion.

MFS Pacific continues to maintain strong support among advisors and investors, which no doubt reflects the fact that it is very different from other finance companies. MFS Pacific is a company with quality assets, significant financial backing and resources few other finance companies can match.

Whilst all around us there is turbulence, it is out of these difficult times that significant opportunity arises for MFS New Zealand.

We continue to seek out well run businesses, with quality people and supportive clients and investors. We want businesses that have the capacity and vision to grow, and who are themselves seeking the stability and security of being part of a large, yet nimble, diversified financial services provider.

We see many opportunities in New Zealand to acquire assets and businesses in sectors where aggregation, rationalisation or consolidation can be achieved. We have set out to build market leading financial services businesses, and where we find businesses or assets that are 'neglected' or 'unfinished' or 'in distress' we will work on them and we will enable those businesses or assets to realise their true potential.

But we can afford to be prudent and selective in our approach. We can afford to wait for the right opportunities and at any one time we have a range of possible transactions under consideration.

So at this, our first annual general meeting, I would like to welcome you as our shareholders. The journey for MFS New Zealand is only just beginning and with your support we are looking forward to an exciting future.

Thank you for your attendance today.