Ann: MEETING: MTF: Notice of special meeting of ordinary shareholders

• Release Date: 29/07/14 16:37
• Summary: MEETING: MTF: Notice of special meeting of ordinary shareholders
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					MTF
29/07/2014 16:37
MEETING

REL: 1637 HRS Motor Trade Finances Limited

MEETING: MTF: Notice of special meeting of ordinary shareholders

SPECIAL MEETING OF ORDINARY SHAREHOLDERS - 13 August 2014

A special meeting of ordinary shareholders has been called by nine MTF
shareholders, who together hold 8.1% of the shares in the company (the
Proposing Shareholders).

The purpose of the special meeting is to consider resolutions put forward by
the Proposing Shareholders relating to MTF's handling of the Sportzone court
case and its communication and disclosure to shareholders in relation to that
litigation.

The case is an ongoing High Court civil proceeding, that was brought by the
Commerce Commission in December 2009, for alleged breaches of the Credit
Contract and Consumer Finance Act 2003, in respect of credit fees charged in
39 credit contracts originated by Sportzone Motorcycles Limited (in
liquidation) between 2005 and 2008. Further background to the litigation and
its status are outlined on pages 4 - 10 of the Notice of Meeting.

Whilst your Board does not agree with the resolutions, it is obliged to hold
the special meeting to consider them in accordance with the Companies Act and
MTF's constitution. Given the concerns raised by the Proposing Shareholders
and the confusion that there may now be around the Sportzone litigation, the
meeting will provide a good opportunity for shareholders to understand the
litigation in more detail. Certainly, the MTF Board understands the
significance of the Sportzone litigation to its shareholders and the
importance of keeping shareholders updated on the progress of that
litigation.  MTF will continue to update shareholders in relation to the
litigation as and when material developments occur.

The Proposing Shareholders indicate, in their letter dated 3 July 2014, that
they are concerned about the liability of MTF, in the event that MTF loses
the Sportzone litigation:

- the resolutions indicate dissatisfaction with the way  that  MTF has
handled the litigation;
- the Proposing Shareholders want MTF to estimate the potential liability of
MTF in the event that a further case, of which there is no present
indication, in respect of all other loans in the MTF portfolio, is
successful;
- the Proposing Shareholders have suggested that MTF approach the Commerce
Commission to settle the Sportzone litigation and any potential liability for
loans that are not the subject of the litigation;
- the Proposing Shareholders are not happy with disclosure by MTF;
- the Proposing Shareholders assert that, rather than engage in the
quantification process with the Commerce Commission, MTF chose to appeal the
litigation.

The resolutions appear designed to undermine the management and governance of
MTF and contain a number of errors that would seem to play into the hands of
those who we compete against.

So that there can be no mistake:
- MTF has been engaged in the quantification process with the Commerce
Commission, including in the High Court, since 24 October 2013;
- MTF reported on the litigation in the half year report dated 12 May 2014,
which clearly states that the quantification process was ordered by the
Court;
- the quantification process continues and, until it is completed, it is not
possible to usefully quantify any liability of MTF because the existing High
Court judgment does not determine the amount by which MTF's fees are
unreasonable;
- the Sportzone litigation applies to 39 loans; it does not apply to any
other loan and it is unclear for a number of reasons what application any
principles that arise from the this case will have on other loans initiated
by MTF;
- to seek a settlement with the Commerce Commission would require MTF to
admit liability in a case which has not yet been decided, would remove MTF's
ability to have the High Court case overturned on appeal, and would
potentially require MTF to unnecessarily admit liability in regard to up to a
further three years of loans;
- it is clear to the Board that any attempt to reach a settlement with the
Commerce Commission at this point is impractical;
- it appears that the Proposing Shareholders have concluded that MTF has lost
the Sportzone litigation and that it is better to settle rather than let the
quantification process run its course and proceed to complete the appeal;
that conclusion is entirely incorrect; and
- the Board is confident that the Sportzone litigation and its disclosure to
shareholders about the case have been managed appropriately, and that it has
received and followed appropriate legal and accounting advice on the
litigation.

It is important that you record your vote at this meeting, whether in person,
by postal vote or by proxy.  We recommend that you vote against the
resolutions.

Your Board is unclear as to the motivation behind the proposals.  The
Proposing Shareholders could have taken a more constructive approach and
asked management or the Board for the information requested in the
resolutions or sought to discuss the litigation or how it is being managed.
That request would have been acted on and would likely have resulted in a
communication to shareholders more generally in a much more efficient way
than needing to call a special meeting.   The resolutions appear to be an
attempt to disrupt the management of the Sportzone litigation, at a critical
point in the proceedings, before the litigation has run its full legal course
and, more generally, are an unnecessary distraction.

As Chairman of the MTF Board, I can assure you that the Sportzone case has
the full attention of the Board and is being managed in the best interests of
MTF and its shareholders.

Recommendation
Although the resolutions are not binding on MTF, because they relate to the
management of the business of MTF, I strongly encourage you to:
- read the contents of the enclosed Notice of Meeting; and
- attend the meeting and vote; or
- appoint a proxy to attend and vote at the Special Meeting on your behalf or
lodge a postal vote  (instructions on how to appoint a proxy or lodge a
postal vote are set out on page 17 of the enclosed Notice of Meeting).
Voting / Proxy forms must be received by 11:00 am on Monday 11 August 2014.

For the reasons in this letter and as more fully set out in the enclosed
Notice of Meeting, the Board unanimously recommends that you VOTE AGAINST ALL
OF THE RESOLUTIONS.

The Special Meeting will be held at Forsyth Barr Stadium, Corporate Suite 9,
130 Anzac Avenue, Dunedin (entry through gate J, car park off Ravensbourne
Road) on Wednesday 13 August 2014, commencing at 11:00 am.

Yours sincerely,

Stephen Higgs
Chairman
End CA:00253236 For:MTF    Type:MEETING    Time:2014-07-29 16:37:20