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Advantage Group Special Meeting of Shareholders

Advantage Group Special Meeting of Shareholders, 23 June 2000

Evan Christian, Chairman
Two years ago our share register held 900 people, now it’s over 3,700.

Over this time we’ve built up a strong base of institutional support, greatly adding to the stability of that register.

We have welcomed two major institutional players onto our register in the last few months, AXA, and AMP Asset Management.

They join New Zealand institutions, Armstrong Jones and New Zealand Funds and international investors, Quantum Emerging Growth Fund and Kingdon Capital Group.

Two years ago this company was the sick dog of the New Zealand Stock Exchange, with a market cap of $4 million, red ink all over the books and a big question mark over its future.

On 1 June this year Advantage was admitted to the NZSE 40.

That’s a significant milestone in the history of Advantage.

Now there are five analysts who follow our stock: CS First Boston, DF Mainland, Merrill Lynch, Ord Minnett and UBS Warburg.

That’s quite a comeback.

They understand, far better than I do, what drives business and what role eCommerce will play.

I don’t profess to understand the finer points of Business-to-Business eCommerce.

I’m just an investor who can spot an opportunity.

But I know that businesses – all businesses, big and small – run computer systems to handle orders, inventory, purchasing, payments and the like.

And in each of these businesses are people who are in contact every day with other businesses, talking to other people there, buying and selling things by phone, email, purchase order and fax.

Buying a computer, booking an airline ticket, restocking the office supplies, ordering medical equipment – all require information to be fed into computer systems on both sides of the transaction.

Now what eCommerce can do is take that information from one computer system, send it over the Internet to another one, check the price of the computer, check that there are seats left on the plane, ask whether it’s the plastic coated paper clips you want, check that the medial equipment is in stock, confirm the order and send the paperwork through to dispatch or ticketing.

That simplifies the process, streamlines it, ands cuts out cost.

Does it cut down on staff? Almost never.

But it does allow people to do better things with their time than chase orders for paper clips.

And that’s what I call progress
Continuing this theme of progress I would now like to briefly discuss the resolutions that we’ll put before you later in the meeting.

These resolutions relate to two fundamental planks of our growth strategy: funding investments for next phase of our growth and attracting and retaining the people who will help us achieve our goals.

The recent market meltdown, which started on NASDAQ and spread rapidly across the globe has crated a new round of opportunities for companies like Advantage.

We’ve weathered the storm.

We’re strong and profitable.

And we are now in a great position to acquire good businesses at much more attractive prices.

We have been rated well on our acquisitions to date; we expect now to be able to do as well is not better.

In light of this the Board will later this morning seek your approval to issue shares to fund further acquisitions.

We have been extremely selective in our acquisition targets: we’ve found companies run by smart, passionate people with capabilities that complement ours.

Since the half-year report was distributed to you we’ve made a number for investments which strengthen our position as a leader in e-commerce development in our region.

In March we acquired leading Auckland based software development company Aldridge Punter Limited.

The acquisition represents a major step for Advantage in meeting the growing demand for end-to-end e-commerce services.

In April we increased our stake in Advantage Portable Technologies and acquired Australian distribution company, Leopard Systems.

Our reason: we want to be able to participate in the fast-growing wireless data market.

It has great potential and building capability there will be key to offering our customers a complete menu of e-commerce solutions.

Last month we acquired Campbell Pope and Associates, specialists in implementing eProcurement solutions, one of the hot new eCommerce areas.

This business adds significant value to our existing implementation capabilities.

And, it was only on Monday of this week that we announced the purchase of New Zealand’s second largest reseller of EFTPOS terminals, Netco.

The Netco transaction represents a key acquisition of core relationships and market share as we get ready to roll out Internet-enabled Point of Sale into the New Zealand market through the launch of ICE terminals.

Our other investment was in the form of a joint venture with GSB SupplyCorp and Qixel.

In May we announced that we would build and operate SupplyNet, a Business-to-Business electronic procurement portal and the first large-scale electronic marketplace in New Zealand.

SupplyNet will initially target the estimated $3 billion spent annually on procurement in New Zealand by the public sector, aiming to substantially reduce transaction costs by building a virtual marketplace based on GSB’s brokerage model of procurement outsourcing.

This is a venture that starts in the public sector and grows from there.

We believe that it represents a huge opportunity for Advantage.

I’d like to move on now, briefly, to the other resolutions we will cover later in the meeting.

These relate to our ability to provide fund share purchase and offer share options to our employees.

Currently, over 50 percent of the people working for this company particulate in the Employee Share Option Plan or the employee share purchase plan.

That’s down from where it was 12 months ago, and that’s because we’ve grown so rapidly that many of the people in newly acquired companies are not yet participating in the plans.

Time and again stock options are shown to be the single most important recruitment, motivation and retention tool available to companies in this sector.

It allows us to incentivise staff to focus the company’s efforts squarely onto those developments that are most likely to enhance shareholder value.

We have compared various US companies and can tell you that, in our sector the norm is for around 20% of the company to be held by the employees.

That’s certainly not typical of New Zealand companies, and it has been our ability to offer such an incentive that has been behind our successful recruitment campaign.

Advantage continues to operate in a sector that is experiencing surging demand.

We’re building a company that can cope with the stresses this brings.

We’re building a company with strong service-based recurring revenues, one that is less volatile than other more speculative Internet ventures.

And we’ve now achieved critical mass to ensure we can service large corporate customers.

Since we last gathered together, we have grown revenues substantially and maintained good profitability, while continuing to invest heavily for future growth.

Going forward we are seeing an increasing number of organisations ranging from Small to Medium sized enterprises to large multinationals corporations recognise that eCommerce is a need-to-have rather than a nice-to-have.

In this context the economics of the Internet has created a new economy with new rules and new leaders.

Companies are scrambling to develop e-business strategies and are looking to grow revenues and drive out costs by applying e-commerce to their operations.

For companies and investors alike, eBusiness is no longer a discretionary investment.

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