Management outvotes DNZ investors

Most Class A shareholders in the $746 million DNZ Property Fund backed a resolution to improve corporate governance to get the firm ready for an NZX listing.

But they were outvoted by their own managers, Class B shareholders.

DNZ's Paul Duffy and Alistair Hassel wrote to investors telling them how the management out-voted shareholders to defeat changes which would have brought more transparency to the business.

They said 24 million Class-A votes backed changes but all Class B shareholders - DNZ Property Group which is the manager - outvoted it.

This has annoyed one of the financial bosses who put the resolution.

Derek Young, chief executive of MMG Advisory Partners which was Money Managers, said most investors clearly backed him and this was shown in the numbers.

But the managers who are Class B shareholders defeated him.

Young said this was precisely DNZ's problem, having two classes of shareholders.

"The resolution we raised on behalf of our clients did in fact get a majority vote but was rejected by the Class 'B' shareholders which is DNZ itself.

"We're generally supportive on DNZ's pursuit of an NZX listing to create investor liquidity.

"The reality is that the current constitution requires minimal disclosure to shareholders, which is particularly concerning if or when DNZ looks to raise capital.

"DNZ can make the capital decision itself without any reference to shareholders, irrespective of the terms of the capital raising, the price, the participants - including related parties - with significant value impacts for its shareholders," he said.

DNZ wrote to shareholders about Young's resolution which was also backed by David van Schaardenburg, principal of NZ Funds.

"In exercising its management powers the board will have regard to the intent of the rules of the proposed new constitution".

But DNZ said it had no warning of the move.

"No previous notice of this resolution had been given to DNZ. Accordingly only those shareholders attending the meeting had the opportunity to hear the discussion and vote on this resolution.

"The directors recommended that shareholders present at the AGM should vote against this resolution as the directors had previously advised Money Managers it was not appropriate to implement the new constitution until the date of a listing, assuming the directors resolve to list the company."

Management fees and expenses at DNZ rose from $3 million in the 2008 year to $5.6 million in the 2009 year.

VOTED DOWN
Results of resolution to improve DNZ governance:

* Class-A shareholders: 24,049,350 for, 4,264,008 against.
* Class B shareholders (managers): 100 per cent voted against.
* Result: resolution failed.