MF Global Holdings Ltd. (

MF

)

F1Q 2012 Earnings Call

July 28, 2011 7:30 AM ET

Executives

Jeremy Skule – Chief Communications Officer

Jon Corzine – Chairman and CEO

Henri Steenkamp – Controller, Chief Financial and Accounting Officer

Analysts

Chris Allen – Evercore Partners

Richard Repetto – Sandler O’Neill & Partners

Michael Carrier – Deutsche Bank Securities, Inc.

Niamh Alexander – Keefe, Bruyette & Woods, Inc.

Roger Freeman – Barclays Capital, Inc.

Howard Chen – Credit Suisse

Kenneth Worthington – JPMorgan Securities

Presentation

Operator

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Good day ladies and gentlemen and welcome to the MF Global’s First Fiscal Quarter 2012 Earnings Conference Call. My name is John and I will be your conference coordinator for today. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of today’s conference.

I would now like to turn the presentation over to your host for today’s call, Mr. Jeremy Skule, Chief Communications Officer. Please proceed.

Jeremy Skule

Good morning and thank you for joining our call today. With us today are Jon Corzine, Chairman and CEO and Henri Steenkamp our CFO. The information made available on this conference call contains certain forward-looking statements that reflect MF Global’s view of future events and financial performance as of June 30, 2011. Any such forward-looking statements are subject to risks and uncertainties indicated from time to time in our SEC filings. Therefore, our future results of operations could differ from historical results or current expectations as more formally discussed in our SEC filings.

The company does not take any obligation to update publicly any forward-looking statements. The information made available also includes certain non-GAAP financial measures as defined under SEC rules. The reconciliation of these measures is included in our earnings release which can be found on our website or in our SEC filings.

With that I’ll now turn the call over to Jon Corzine.

Jon Corzine

Good morning, everybody, thank you all for joining our fiscal first quarter call. This morning Henri Steenkamp, our CFO, and I will update you on our financial progress in the quarter, as well post you on continuing build out of our strategic plan. Quarter’s results is summarized on slide three in your packet, reflect the positive outcome of the reshaping of our business and continuing evolution as a broker dealer.

In summary, our firm delivered our highest quarterly revenues and GAAP earnings in nearly three years. These results were delivered, as you know, in a challenging environment with respect to volumes, volatility, interest rates, and pricing. Our results benefited from strong contributions from client facilitation and principal trading was solid if not an exciting contribution from our brokerage FCM business. Structured equity, metals trading and debt finance activities was away.

Our financial results were also achieved while returning compensation costs to a trajectory consistent with our long-term 50% compensation to net revenue objective. While culturally and in practice our compensation structure continues to evolve, we’ve made substantial progress in aligning the interest of our employees with shareholders. We anticipate further progress in this area over the longer-term with broadening application pay for performing system.

Slide four, gives a visual presentation of the changing mix of our business. You will note the growing the contribution of trading over the past four quarters. This perspective reinforces our strategic view that diversifying in the client dealing and principal trading works to reduce dependence on a single line of business and allowed us to grow revenues even in a difficult environment. We obviously understand that trading carries attended risks, but it was also subject to diversification and focused risk management.

As I often repeated, I believe our business transition would be roughly a four to six quarter process. As shown on slide five, we are on track to meet that timetable and we will be aggressive in our actions over the next few months in closing out our core restructuring efforts. To that end, we are working to reframe our profile and our capital markets units. Besides reallocating resources within those businesses, geographically and functionally, we’re right sizing and refocusing our client activities towards underserved middle markets, natural resource and commodity-oriented clients.

In each of our product lines, we are upgrading and broadening our trading and sales capacity. In all of our capital markets activities, we have sought to expand client facilitation services. We’ve been particularly active building up our mortgage and credit related business including the early steps necessary to develop an underwriting capacity.

Just two days ago, we announced the addition of key leadership personnel in these product lines. New clients and deeper penetration with existing clients have begun to drive new capital market opportunities and exposures as reflected in growing trading activity and volumes. We continue to see deleveraging and derisking of our larger competitors, which opens opportunities for us to fill a growing risk intermediation void among investing clients.

We have up to this point evolved our business while decreasing leverage and holding risk has measured by VAR as relatively consistent levels, roughly on average between $3 million and $5 million. And while we continue to emphasize short duration risk and a high turnover philosophy, I would expect some growth in both the balance sheet and VAR in quarters ahead, if we are to serve our clients effectively, expand their number and grow revenues.

To this point, I focused most of my comments on our newly formed Capital Markets Group. But let me be clear, we’ve also been hard at work strengthening our Retail and Prime Services groups. Both groups are charged with building less VAR revenue streams that lever off of our historical FCM Brokerage Franchise. And while it is a difficult and uncertain period, especially with respect to regulatory framework, together these groups drove our market share higher in listed derivative products as our client volumes on exchanges increased 10% quarter-over-quarter.

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