Macquarie International Infrastructure Fund (MIIF) shareholders have voted against a proposal by hedge funds Lim Advisors and Metage Capital to add three nominees to the Singapore-listed fund's board.

About 260 shareholders attended the special general meeting (SGM) in Singapore on Wednesday to participate in a poll vote, while stakeholders representing about 550 million votes participated via proxy.

Some 60% of total shareholder votes were against the appointment of the three board nominees jointly put forward by the hedge funds: Christopher Brader and Nicholas Paris, who are involved with existing Lim funds, and Miles Staude, an investment manager at Metage.

However, 77% of shareholders voted in favour of a proposal by Lim and Metage to increase the number of directors to nine, from five. The board had recommended that shareholders vote in favour of the resolution, but has stated that it intended to appoint only one additional independent director if the motion was carried.

In a joint statement to shareholders, Lim and Metage thanked shareholders “for the support they have shown us over the past weeks in trying to achieve our common objectives”, without elaborating.

They added that they were pleased the board acted on recommendations to appoint an independent adviser to undertake a strategic review – in this case, CIMB Bank – and adding at least one new independent director.

Hong Kong-based Lim and Metage of London, which jointly own just over 10% of MIIF, have contended that an expanded board would help to identify and rectify underlying issues that have left MIIF trading at a disproportionately low stock market valuation relative to its net asset value.

The hedge funds’ endeavour to gain three board representatives – and MIIF’s resistance to it – was played out in public, given that retail investors comprise about half of MIIF’s investor base.

MIIF chief executive Heng Chiang Meng held a press conference in the week prior to the SGM, urging shareholders to vote against the appointment of the hedge funds’ three nominees.  

Meanwhile, Lim and Metage had jointly put an ad in a couple of Singapore newspapers, urging shareholders to vote in favour of changing the board composition.

Both sides were understood to have privately met MIIF’s institutional investors prior to the SGM to present their side of the argument.

Lim founder George Long, who keeps a low profile, has been uncomfortable at the level of public display, say sources close to the firm. However, the SGM happened only after Lim's and Metage’s efforts to bring about change once meetings with Heng and the MIIF board failed, say sources.

Equally, Macquarie Group had distanced itself from the melee, although it is the majority shareholder in MIIF – albeit with a relatively small 11% stake.   

The hedge funds are understood to have been unhappy at the hands-off approach taken by Macquarie Group in running MIIF. As the parent entity, it collects management fees – said to be $8 million annually – in addition to 10% dividends per annum from MIIF, and is thus seen by some shareholders as being satisfied with maintaining the status quo.

Additionally, Macquarie Group is understood to have been MIIF’s appointed adviser to its portfolio and investments and divestments, garnering additional fees.

One of MIIF’s perceived missteps was its investment in cable company Taiwan Broadband Communications (TBC). Although regarded as a quality business which contributed to MIIF’s healthy dividend payout, TBC represents about 60% of the infrastructure fund’s assets, which is said to have scared off new investors, given the lack of portfolio diversification.

Part of MIIF’s stake in TBC was acquired from a third party – Intermediate Capital Group.

In a presentation at the SGM prior to the vote, Heng pointed out that four out of five of MIIF’s board members are independent directors who collectively own about five million MIIF shares, thus their interests are aligned with those of shareholders.

MIIF declined to comment on the vote outcome.