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LIM Advisors Limited Today Published An Open Letter to All Shareholders of The Macquarie International Infrastructure Fund

LIM Advisors Limited Today Published An Open Letter to All Shareholders of The
         Macquarie International Infrastructure Fund Limited ("MIIF")

  PR Newswire

  SINGAPORE, March 1, 2013

SINGAPORE, March 1, 2013 /PRNewswire/ -- Ahead of the upcoming Annual General
Meeting of MIIF due to take place on 8 March 2013, LIM Advisors Limited today
published the following letter to all MIIF shareholders:

Dear Shareholders,

Macquarie International Infrastructure Fund----Open Call to Reject Macquarie's
Proposed Fee Amendment at the Annual General Meeting on 8 March 2013

The Macquarie International Infrastructure Fund (MIIF) will hold an Annual
General Meeting (AGM) on 8 March 2013. On 20 February 2013, the Chairman of
the Board of MIIF sent a letter to the Shareholders of MIIF announcing various
proposals, including changing the management fee and incentive fee structure,
that will be voted on at the AGM on 8 March 2013.

LIM Advisors Limited is the manager or advisor of two investment funds that
currently own 7.60% of the outstanding shares of MIIF. We are writing to
openly express our disappointment over the proposed amendment to the
Management Agreement between MIIF and Macquarie Infrastructure Management
(Asia) Pty Limited ("MIMAL"). We urge all Shareholders to vote against
Resolution 6 in the upcoming AGM to be held on 8 March 2013.

According to MIIF's Letter to Shareholders dated 20 February 2013 (the
"Letter"), the Independent Directors of the Board have concluded that the
existing management fee arrangement with MIMAL should be amended to better
align the interests of the Company and MIMAL, given the Revised Strategy (as
defined in the Letter). In this regard, the Independent Directors proposed
that MIMAL be entitled to a new fixed Success Fee of at least S$15 million in
case the proceeds from selling assets (the "Divestment Proceeds") achieves
what the letter refers to as the "Threshold Level". This Threshold Level is
fixed at 5% below the officially reported Net Asset Value of MIIF, which is
called the "Board's Valuation" in the Letter. In addition, MIMAL will also
receive 10% of any proceeds between the Threshold Level and the Board's
Valuation and a further 20% of excess proceeds over the Board's Valuation.

The Letter states that MIMAL agrees to a reduction of the annual Base
Management Fee from 1.50% to 0.75% of MIIF's Net Investment Value, and these
amendments are necessary to incentivize it to dispose of the existing assets
in an orderly and timely manner. Shareholders should note that the amount of
annual Management Fees payable to MIMAL is set to fall automatically after
each asset disposal under the current management contract. Therefore, there is
no reason for the Board of MIIF to incentivise or reward MIMAL to give up
something they are already contracted to give up.

We believe the proposed Success Fee is unnecessary and the proposed
restructuring objectionable for the following reasons:

  *The Board of MIIF and all Shareholders should be reminded that there is a
    performance fee arrangement already in place that would pay MIMAL 20% of
    any gains above an 8% annual hurdle rate. MIMAL has failed to earn any
    performance fees since 2007 due to its inability to generate returns for
    shareholders above this hurdle rate. In fact, the performance deficit is
    approximately S$609.3 million according to the Letter. Therefore, we
    believe any proposal that gives MIMAL a chance to make any performance
    fees when MIMAL has not generated the required returns could be considered
    generous and unnecessary. We further believe that a fixed Success Fee
    based on selling assets equal to the Threshold Level, which is
    approximately 5% below the reported NAV, is very unusual. In addition,
    when MIIF's focus was redirected in 2009 from its original strategy of
    investing in Europe and North America to investing in Asia, which led to
    the selling of assets in Europe and North America, the fee structure was
    not changed. MIMAL was able to successfully sell these assets without any
    additional incentives or a new success fee structure. We therefore see no
    reason why the fee structure should change as proposed.
  *Setting the Threshold Level at a 5% discount to the reported NAV implies
    the reported NAV does not reflect the fair value of the underlying
    assets. It implies that all the underlying assets cannot be liquidated
    at their stated value used to determine the NAV of the Fund. This is
    contrary to what Shareholders have been informed on page 13 of MIIF's 2012
    Annual Report, where it says "MIIF uses the discounted cash flow (DCF)
    approach to value its investments. These valuations reflect the fair
    value for which infrastructure assets could be exchanged between
    knowledgeable, willing parties in an orderly arm's-length transaction."
    We call on the Board and MIIF's Auditor, PriceWaterhouseCoopers, to
    urgently clarify if the current NAV reflects the fair market value of the
    underlying assets and liabilities held by MIIF.
  *These amendments to the fee structure are being proposed before the
    appointment of an additional Independent Director.On 4 December 2012, the
    Board of MIIF announced its intention to appoint an additional Independent
    Director and that it would appoint the global executive search firm
    Spencer Stuart to assist with the search for this Independent Director.
    We note that Resolution 5 is for Shareholders to confirm the authority of
    the Directors to appoint such a director. We call on the Board to wait
    until an additional Independent Director has been appointed before
    proposing any changes to the fee structure, or proposing other material
    changes to MIIF.
  *The proposed restructuring does not provide transparency about whether the
    Macquarie Group will charge additional investment banking fees, corporate
    finance fees, advisory fees or other fees and charges for services to MIIF
    or to the Board of MIIF including for arranging the sale of assets when
    MIIF liquidates its portfolio of investments. We call on the Board of
    MIIF to clarify what additional fees and charges may be paid to the
    Macquarie Group and the basis and rationale for such fees and charges.
    Specifically, we question the following statement on page 6 of the Letter
    discussing the Threshold Level: "However, the proceeds which the Company
    could receive may not be the same amount, as the Board's Valuation does
    not take into account any transaction costs incurred by either the
    purchaser or the Company or other relevant considerations in completing
    any divestment. Specifically, the purchaser may incur transaction costs
    including financial adviser fees, due diligence costs, legal costs, stamp
    duty and other transaction taxes, and refinancing costs. In addition,
    the Company may incur transaction costs including financial adviser fees,
    legal costs, vendor due diligence costs, transaction taxes and other
    miscellaneous costs. The Independent Directors believe that total
    transaction costs relating to the divestment of the Company's businesses
    amounting to 5.0% of the gross proceeds are reasonable." Why does the
    Letter mention the costs of the purchaser? Usually, the purchaser pays
    its own costs and fees. Does this mean that MIIF will bear some or all
    of the transaction costs of the purchaser of its assets? Are any of the
    financial adviser fees and due diligence fees mentioned above going to be
    paid to any related entity?

According to the Letter, MIMAL holds 9.29% of the Shares as at 16 February
2013. MIMAL and its associates are excluded from voting on Resolution 6 as
they are an "interested person" in relation to the Proposed Fee Amendment.

We will vote against Resolution 6 in the upcoming Annual General Meeting. We
may also vote against other Resolutions. We urge all Shareholders to pay close
attention to the proposed amendments to the fee structure since we believe
they give MIMAL an unnecessary share of your interest in this fund upon this
fund's wind-up.

Yours faithfully,

LIM Advisors Limited

Contact: FTI Consulting, Tom Evrard, tom.evrard@fticonsulting.com, +65 9107
6123
 
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