Meritas Mutual Funds has divested all of its shares in Magna International, citing concerns over the dual-class share structure at Magna and the compensation provided to Chairman Frank Stronach.

"These issues certainly received a lot of media attention, and our hope was that Magna would start dealing seriously with them," Meritas said in a newsletter Feb 3.

Last spring, Meritas withheld its votes from all of Magna's directors at the company's annual meeting May 6.

At the time, Meritas CEO Gary Hawton said there are two key issues that investors have with Magna--a dual-class share structure that allows Magna's founder and chairman, Frank Stronach to control just 3.4% of the equity of Magna International Inc. but maintain control over the entire firm, and the level of compensation provided to Stronach, amounting to over US $36 million in 2003.

"Investors cannot easily avoid all dual-class share companies when they make up one-quarter of the shares in the benchmark index.  But if we feel the power is being abused, we will fight back or sell.  We have "fought back", and based on their response we have now "sold" our holdings and have declared Magna International to be ineligible for investment in any of our funds, " stated the newsletter.

"We think that the risks associated with Magna's poor governance could soon be translated into a corporate governance discount in the shares and we do not want to subject our investors to that possibility."

For more information, visit www.meritas.ca