MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED Annual General Meeting 8 March 2013
Agenda 1 2 3 MIIF Chairman s Address Formal Proceedings Questions Presenter Heng Chiang Meng Heng Chiang Meng 4 Refreshments MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED 2
The Board Mr. Heng Chiang Meng Mrs. Lee Suet Fern Mr. Robert Mulderig Mr. Francis Kwok Mr. Michael Hamer Chairman, Independent Director Independent Director Independent Director Nominated Director, Executive Independent Director Present Teleconference MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED 3
MIIF Chairman s Address Heng Chiang Meng MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED 4
Strategic Review Strategic Review completed in 2012 The Board initiated the Strategic Review in June 2012 The Strategic Review 1, which was completed in December 2012 generated the following key observations: MIIF s share price did not adequately reflect the value of MIIF s infrastructure businesses MIIF s current structure may not be the most appropriate structure to reflect the value of its businesses Taiwan Broadband Communications (TBC), Changshu Xinghua Port (CXP) and Hua Nan Expressway (HNE) are each generating sustainable cash distributions which underpin their respective values Executing MIIF s stated strategy of investing directly in operating Asian infrastructure businesses is constrained by MIIF s current share price and the prevailing market environment Following the Special General Meeting in December 2012, the Board decided to reinitiate the search for an additional Independent Director Note: (1) Included an assessment by MIIF s independent financial adviser, CIMB Bank Berhad, Singapore branch MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED 5
Strategic Review Board to undertake a range of initiatives to generate and return value After considering the key observations and assessing the alternatives available to MIIF, the MIIF Board decided to undertake the following initiatives: Distribute existing excess cash to shareholders as a one-off special dividend Commence a joint process with Macquarie Korea Opportunities Fund (MKOF), MIIF s TBC co-shareholder, to realise maximum value for their investment in TBC Pursue the orderly divestments of MIIF s interest in HNE, CXP and Miaoli Wind Distribute the proceeds from any divestment to shareholders as soon as practicable Allow MIIF s corporate-level debt facility to lapse upon maturity Amend the fee structure with MIIF s manager, Macquarie Infrastructure Management (Asia) Pty Limited (MIMAL) to better the alignment with MIIF s revised strategy MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED 6
Strategic Review Good progress made on the implementation of initiatives announced Special dividend of 3.0 cents per share paid on 13 February 2013 Successfully negotiated the early termination of MIIF s undrawn corporate-level debt facility Joint process with co-shareholder to realise maximum value for TBC In Progress Orderly divestments of HNE, CXP and Miaoli Wind In Progress Amend MIIF s fee structure with MIMAL to better the alignment with MIIF s revised strategy The Independent Directors with the assistance of Spencer Stuart have identified a shortlist of qualified individuals for the additional Independent Director role In Progress In Progress The Board will continue to keep the market appropriately informed of further developments MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED 7
2012 Business Performance Continued robust performance of businesses in 2012 TBC experienced strong subscriber growth in its broadband and digital businesses with subscribers increasing by 6.3% and 21.7% compared to prior corresponding period CXP continued to perform strongly driven by higher log, paper & pulp volumes and higher average tariffs across general cargoes HNE registered strong traffic growth as a result of favourable traffic drivers, however the tolling revision implemented in June 2012 continue to have an adverse impact on its financial performance S$ millions 100 90 80 70 60 50 40 30 20 10 0 11.4 12 Months Ended 31 December Proportionate EBITDA¹, ² 4.2% 11.8 67.6 6.5% 63.2 3.0% 90.7 93.4 CXP HNE TBC Miaoli Wind s senior debt (NT$440 million) repayment date has been extended to April 2013 by its lenders 12 months to 31 Dec 2011 12 months to 31 Dec 2012 Notes: (1) All calculations use 31 December 2012 exchange rates (2) Assumes MIIF owns 47.5% of TBC in 2011 MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED 8
Dividend Portfolio businesses continue to generate sustainable cash distributions MIIF s dividend policy remains unchanged MIIF s ordinary dividend is based on the distributions that MIIF receives from its businesses and are generated from the normal operations of these businesses MIIF intends to distribute the proceeds from any divestment to shareholders as soon as practicable TBC, CXP and HNE are each generating sustainable cash distributions. However, the tolling revisions which were enforced on HNE are expected to adversely impact the income that MIIF will receive from HNE in 2013. This is anticipated to negatively impact MIIF s future dividend from operating income MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED 9
Formal Proceedings Heng Chiang Meng MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED 10
Summary of Resolutions Receive and adopt the Financial Statements and Reports Re-elect Heng Chiang Meng as Director Re-elect Robert Andrew Mulderig as Director Re-appoint Messrs PricewaterhouseCoopers LLP as Auditors Confer authority on the Directors of the Company to appoint an additional director Approve the amendment of the Management Agreement with MIMAL MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED 11
Questions MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED 12
Proxies Received FOR % of Total AGAINST % of Total DISCRETION % of Total Total Resolution 1 360,623,969 80.16 207,000 0.05 89,071,231 19.80 449,902,200 Resolution 2 324,088,511 73.37 28,559,452 6.47 89,071,231 20.16 441,719,194 Resolution 3 324,313,511 73.42 28,334,452 6.41 89,071,231 20.16 441,719,194 Resolution 4 360,515,539 80.13 315,430 0.07 89,071,231 19.80 449,902,200 Resolution 5 355,779,823 79.08 5,051,146 1.12 89,071,231 19.80 449,902,200 Resolution 6 214,167,956 60.45 51,063,403 14.41 89,071,231 25.14 354,302,590 MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED 13
Resolution 1 To receive and adopt the Financial Statements, the Statement by Directors and Report of the Auditors for the financial year ended 31 December 2012 MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED 14
Resolution 2 To re-elect Heng Chiang Meng who will retire by rotation pursuant to Bye-law 56(e) of the Bye-laws of the Company, as director Note: Heng Chiang Meng if re-elected, will remain a member of the Company s Audit and Risk Committee, and is considered an independent director for the purpose of Rule 704(8) of the Listing Manual (Listing Manual) of the Singapore Exchange Securities Trading Limited (SGX-ST) MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED 15
Resolution 3 To re-elect Robert Andrew Mulderig who will retire by rotation pursuant to Bye-law 56(e) of the Bye-laws of the Company, as director Note: Robert Andrew Mulderig if re-elected, will remain a member of the Company s Audit and Risk Committee, and is considered an independent director for the purpose of Rule 704(8) of the Listing Manual MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED 16
Resolution 4 To re-appoint Messrs PricewaterhouseCoopers LLP as the Company s Auditors and to authorise the directors of the Company (the Directors) to fix their remuneration MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED 17
Resolution 5 To confer authority on the Directors of the Company to appoint (at such time as the board shall deem fit) an additional director pursuant to Bye-law 56(d) MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED 18
Resolution 6 To approve the amendment of the Management Agreement made between the Company and Macquarie Infrastructure Management (Asia) Pty Limited dated 19 May 2005 on the terms set out in the Letter to Shareholders dated 20 February 2013 (Letter) MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED 19
Polling MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED 20
Close MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED 21
Important Notices Disclaimer Macquarie International Infrastructure Fund Limited EC36305 (MIIF) is a Bermudian registered mutual fund company listed on the Singapore Exchange Securities Trading Limited. Macquarie Infrastructure Management (Asia) Pty Limited (MIMAL) (AFSL 284 621) is the manager of MIIF. MIMAL is a wholly owned subsidiary of Macquarie Group Limited (ACN 122 169 279) (MGL). None of the entities noted in this document is an authorised deposit-taking institution for the purposes of the Banking Act 1959 (Commonwealth of Australia) and their obligations do not represent deposits or other liabilities of Macquarie Bank Limited (ABN 46 008 583 542) (MBL). MBL does not guarantee or provide assurance in respect of the obligations of these entities. This presentation has been prepared based on available information. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness or correctness of the information, opinions and conclusions contained in this presentation. To the maximum extent permitted by law, neither MGL, MBL, MIIF, MIMAL, their directors, employees or agents, nor any other person accepts any liability for any loss arising from the use of this presentation or its contents or otherwise arising in connection with it, including, without limitation, any liability arising from fault or negligence on the part of MGL, MBL, MIIF, MIMAL or their directors, employees or agents. In particular, no representation or warranty is given as to the accuracy, likelihood of achievement or reasonableness of any forecasts, prospects or returns contained in the information. Such forecasts, prospects or returns are by their nature subject to significant uncertainties and contingencies. Each recipient of the information should make its own independent assessment of the information and take its own independent professional advice in relation to the information and any action taken on the basis of the information. General Securities Warning This presentation is not an offer or invitation for subscription or purchase of or a recommendation of securities. It does not take into account the investment objectives, financial situation and particular needs of the investor. Before making an investment in MIIF, the investor or prospective investor should consider whether such an investment is appropriate to their particular investment needs, objectives and financial circumstances and consult an investment adviser if necessary. Information, including forecast financial information, in this presentation should not be considered as a recommendation in relation to holding purchasing or selling, securities or other instruments in MIIF. Due care and attention has been used in the preparation of forecast information. However, actual results may vary from forecasts and any variation may be materially positive or negative. Forecasts by their very nature, are subject to uncertainty and contingencies many of which are outside the control of MIIF. Past performance is not a reliable indication of future performance. MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED 22
MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED Annual General Meeting 8 March 2013
MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED ANNUAL GENERAL MEETING 2013 CHAIRMAN S ADDRESS 8 MARCH 2013 Slide 1 Cover Good morning ladies and gentlemen. My name is Heng Chiang Meng, and I am the Chairman of Macquarie International Infrastructure Fund Limited. As we have a quorum, and in accordance with the Notice of the Meeting, I now declare this Annual General Meeting open at 10:00am. As the notice convening this meeting has been in your hands for the statutory period, the notice will be taken as read. On behalf of the Board, I would like to welcome those shareholders who have made time to attend this Annual General Meeting. In addition to shareholders present today, the holders of over 440 million MIIF ordinary shares are represented by proxies. Before we begin, as a courtesy to all shareholders and guests present, could I ask that all mobile phones be turned off to avoid disruption to the meeting. In addition, I should also note that today s meeting will be recorded. Slide 2 Agenda In terms of the agenda for today s meeting, the first item is the Chairman s Address where I will make some brief remarks. We will then move on to the formal business of the meeting. Shareholders will have the opportunity to ask questions after the presentation of the resolutions to be considered at this meeting. Slide 3 The Board Please allow me to begin by introducing your Board: I have been an independent director of MIIF since 2005 and the Chairman since 2011. Mrs Lee Suet Fern has been an independent director of MIIF since 2007. She is the Senior Director of Stamford Law, a leading Singapore law firm and has for the past 20 years served on the boards of numerous publicly listed companies. Mrs Lee currently serves on the boards of the global insurance company, AXA and global healthcare company, Sanofi. 1
Mr Robert Mulderig has been an independent director of MIIF since 2005. He was the Chairman and Chief Executive Officer of the NYSE-listed company, Mutual Risk Management for 20 years and a member of the board of governors of the Bermuda Stock Exchange. In addition, Mr Mulderig has extensive listed infrastructure funds experience having been Independent Director and Chairman of Macquarie Infrastructure Group International. Mr Michael Hamer, who is attending this meeting via teleconferencing, has been an independent director of MIIF since 2005. He was previously a senior executive at JP Morgan focused on capital markets and mergers and acquisitions, and at Centre Solutions, a Bermuda-based reinsurance company. In addition, Mr Hamer has extensive experience in the listed funds sector and was previously Independent Director and Chairman of Macquarie Media International. Mr Francis Kwok is the nominated executive director of MIIF and the Chief Executive Officer of MIIF s manager, MIMAL. He has over 15 years experience in infrastructure and infrastructure funds management. Prior to his role with MIIF, Mr Kwok was the Global Chief Operating Officer of Macquarie s Infrastructure and Real Assets division which has approximately US$100 billion of assets under management. In addition, joining the Board on stage is Mr Oscar Ludwigson, representing CIMB Bank Berhad, Singapore Branch, independent financial adviser to the Board. Slide 4 MIIF Chairman s Address With that I would now like make some brief remarks on MIIF. Slide 5 Strategic Review 2012 has been a substantial and busy year for MIIF. In recent years, the Board has taken a number of proactive steps to deliver shareholder value, including the acquisition of additional interests in Taiwan Broadband Communications (TBC) which increased MIIF s sustainable dividend profile and on-market share buy-backs. Despite these actions, MIIF s share price did not improve sufficiently to reflect the value of MIIF s businesses. Consequently, last year the Board felt that it was an appropriate time to undertake an extensive strategic review to consider all alternatives to generate value for MIIF shareholders. The strategic review, which included an assessment by CIMB Bank Berhad, Singapore Branch (CIMB Bank) and consultation with a cross section of shareholders, was concluded in December 2012. The strategic review generated the following key observations at that time: 1) MIIF s recent trading range did not adequately reflect the value of MIIF s infrastructure businesses; 2) MIIF s current structure may not be the most appropriate structure to reflect the value of its businesses; 2
3) Taiwan Broadband Communications (TBC), Changshu Xinghua Port (CXP) and Hua Nan Expressway (HNE) are each generating sustainable cash distributions which underpin their respective values; and 4) Executing MIIF s stated strategy of investing directly in operating Asian infrastructure businesses is constrained by MIIF s share price and the prevailing market environment. Slide 6 Strategic Review After considering the above observations and assessing the alternatives available to MIIF, the Board concluded that in order to maximise value for MIIF s shareholders the strategy for MIIF should change. As a result, the Board decided to undertake the following initiatives: 1) Distribute existing excess cash to shareholders as a one-off special dividend; 2) Commence a joint process with Macquarie Korea Opportunities Fund (MKOF), MIIF s TBC coshareholder, to realise maximum value for their investment in TBC; 3) Pursue the orderly divestments of MIIF s interests in HNE, CXP and Miaoli Wind; 4) Distribute the proceeds from any divestment to shareholders as soon as practicable; and 5) Allow MIIF s corporate-level debt facility to lapse upon maturity. 6) Amend the fee structure with MIIF s manager, MIMAL to better the alignment with MIIF s revised strategy Slide 7 Strategic Review We are pleased to report that good progress has been made in the implementation of the initiatives identified. In line with these initiatives, MIIF distributed its existing excess cash to shareholders in the form of a special dividend of 3 cents per share on 13 February 2013. In addition, it has successfully negotiated the early termination of MIIF s undrawn corporate-level debt facility with UOB. This action is beneficial to shareholders as it eliminates the financing fees that MIIF would have incurred if it had waited for the debt facility to expire. MIIF has commenced a joint process with its co-shareholder in TBC to realise maximum value for their investment in the business. In addition, the preparation for the divestment of MIIF s other businesses has begun. I note that the divestments of MIIF s businesses are complex processes and may take a significant time to complete especially given the nature of these businesses and their shareholding structures. Infrastructure businesses are typically subject to significant regulatory oversight and any divestments may require approvals from relevant regulatory authorities. In addition, any divestment is subject to 3
processes and conditions defined in the respective shareholders agreements of MIIF s businesses. These processes will require active management and prudent actions to safeguard the interests of MIIF shareholders. As you are aware, the Board intends to appoint an additional independent director to the Board. The Independent Directors, with the assistance of Spencer Stuart, a global executive search firm, have initiated the search and identified a shortlist of suitably qualified individuals for the role. In accordance with MIIF s continuous disclosure obligations, the Board will keep the market appropriately informed of further developments in relation to the appointment of the additional independent director and the other initiatives that MIIF is currently pursuing. We note that a number of the initiatives outlined by the Board will require the approval of MIIF s shareholders at the appropriate time. This morning, MIIF s shareholders will be asked to approve the amendment to the management fee arrangement between MIIF and its manager, MIMAL. As outlined previously, the change in MIIF s strategy substantially alters the focus of MIIF and, if successfully implemented, would lead to the winding down of the Company. As the existing management fee arrangement was formulated to encourage MIMAL to implement MIIF s previous strategy of making long-term investments in direct Asian infrastructure businesses and to grow the Company, the Independent Directors, with advice from their independent financial adviser, CIMB Bank, concluded that an amended approach to MIMAL s management fee arrangement is required to realign the interests of MIIF and the Manager. Consequently, the Independent Directors, with assistance from CIMB Bank, negotiated amendments to MIMAL s management fee arrangement which we consider to be in the best interests of MIIF s shareholders. The proposed management fee revisions comprise: the reduction of the base fee by 50 per cent, which would lower MIIF s operating expenses; and the establishment of a success fee linked to the successful divestment of MIIF s businesses, which would only be paid if the proceeds from the divestment of MIIF s businesses reach a level which represents a 30.4 per cent premium to the value of MIIF s businesses implied by its share price, prior to the announcement of the strategic review on 10 October 2012. The success fee will only be paid when all three of MIIF s major businesses have been divested and all proceeds received by MIIF. The Independent Directors have been advised by KPMG Corporate Finance, that the proposed management fee revisions are on normal commercial terms and are not prejudicial to the interests of MIIF and its minority shareholders. In addition, the Securities Investors Association (Singapore) and 4
leading proxy advisory firms, including ISS have independently endorsed the proposed management fee revisions. The Independent Directors unanimously recommend that shareholders vote FOR the amendment of the management fee arrangements with MIMAL. Slide 8 2012 Business Performance In terms of the performance of MIIF s businesses in 2012, these continued to perform to expectations with TBC and CXP recording growth in EBITDA. TBC s EBITDA was up 3% on the prior corresponding period driven by a 6.3% increase in broadband subscribers, 21.7% growth in digital TV subscribers and steady growth in basic cable TV subscribers. EBITDA at TBC has grown by 5% per annum since MIIF s acquisition of the business in 2007. With its strong foundation of stable and growing basic cable TV base, TBC continues to be a market leader with new products in both broadband and digital TV. These are expected to drive TBC s operational performance in 2013. CXP performed well in 2012 with EBITDA increasing by 4.2% over the prior year. Volumes for log imports were up 14.6% due to strong domestic demand particularly from the construction sector and paper and pulp were up 22% as a result demand for paper products in China. In addition, we have observed higher average tariffs generated across CXP s general cargo volumes. CXP is anticipated to continue performing steadily in 2013. HNE s operational performance was impacted by the tolling revisions that came into effect on 1 June 2012, contributing towards the 6.5% decline in EBITDA when compared with the prior year. Despite the lower EBITDA, total traffic volumes increased by 17.4% during the year as a result of positive traffic drivers, such as favourable demographical changes and traffic from new complementary roads such as Guanghe Expressway and HNE s lower tolls. However, it is expected that the tolling revisions will continue to have an adverse impact on HNE s financial performance in 2013 with the full year effect of the toll rate reduction. This, in turn, is anticipated to adversely impact the income that MIIF receives from HNE in 2013 and MIIF s future dividends to shareholders. As previously discussed, Miaoli Wind s senior debt of NT$440 million was due for repayment in December 2012. Miaoli Wind did not repay this loan and the loan has been extended to April 2013 by Miaoli Wind s lenders. Slide 9 Dividend MIIF paid an interim dividend of 2.75 cents per share in September 2012 and a final dividend of 2.75 cents per share in February 2013. The dividends paid were consistent with the guidance provided to shareholders. In addition, MIIF distributed its existing excess cash to shareholders as a special dividend of 3.00 cents per share in February 2013. Total dividends paid to MIIF shareholders for the year ended 2012 were in excess of S$98 million. 5
As MIIF pursues its revised strategy, its current dividend policy shall remain unchanged and that is to pay ordinary dividends based on the distributions that MIIF receive from its investments and are generated from the normal operations of these businesses. As discussed today, your Board has concluded that in order to maximise value for MIIF s shareholders the strategy for the Company should change and it would undertake a number of initiatives including the orderly divestment of MIIF s businesses to generate and return value to shareholders. We note that good progress has been made executing these initiatives to date and the Board will endeavour to execute the remaining initiatives in a timely manner. We ask for your continued support as we pursue the strategy for MIIF. <END> 6