ISS Advises MKIF Shareholders to Vote against Replacing Fund Manager

Macquarie Korea Infrastructure Fund (MKIF) announced on Sept. 6 that the Institutional Shareholder Service (ISS), the largest proxy advisory firm in the world, has advised MKIF shareholders to vote against a proposal to replace MKIF’s fund operator at an extraordinary general meeting to be held on the 19th.

The ISS said in its report, “MKIF recorded an annual return on investment of 9.4 percent and a dividend yield of 7.2 percent since going public in 2006, which were far higher rates of return than that of government bonds. This is the substantial evidence of creating a considerable amount of shareholder value.”

It added, “Taking a look at the total shareholder returns in the past one year, three years and five years, it achieved the results that overwhelm both KOSPI Index and similar global funds.

Platform Partners Asset Management, which raised the issue, also admitted that the return rates on funds were high during a conversation with the ISS.

Regarding a comparison with other funds managed by Macquarie Group, the ISS said, “Every country has a different regulatory environment and stage of development for the infrastructure industry so the comparison doesn’t seem to be valid.”

Based on such analysis results, the ISS advised MKIF shareholders to vote against the decision at the extraordinary general meeting, saying, “The replacement of fund operator won’t be in shareholders’ interests.”

Meanwhile, creditors, which signed a credit offering contrast with MKIF, including banks, recently sent a letter to MKIF, saying, “We don’t agree on termination of the asset management consignment contract signed by MKIF and Macquarie Korea Asset Management (MKAM) at the extraordinary general meeting to be held on the 19th.”

The creditors said, “The cancellation of the asset management consignment contract signed by MKIF and MKAM without prior written consent is an event of default according to credit offering stipulation. In this case, creditors can cancel a loan commitment in the credit offering contract and force MKIF to repay its debts immediately.”

The ISS recommended to vote against the merger of Samsung C&T in 2015 and the spin-off of Hyundai Mobis in 2018, being in favor of U.S. hedge fund Elliott which has led the shareholder activism at that time.