Macau Property Opportunities Fund Ltd. : Notice of EGM

13 March 2014

Macau Property Opportunities Fund Limited

("MPO" or the "Company")

Proposed Return of Cash to Shareholders, Discontinuation Vote, Amendments to Articles of Incorporation, Amendment of Management Agreement and Notice of Extraordinary General Meeting

Further to its announcement of 28 February 2014, the Board of MPO announces that it has today posted to Shareholders a circular (the "Circular ") setting out the terms of a proposed return of cash to Shareholders of US$29 million and giving notice of an Extraordinary General Meeting at which approval will be sought for its implementation.  Under the terms of the Return of Cash, Shareholders will receive a bonus issue of a newly created class of shares, B shares; cash will then be returned to Shareholders through a redemption of the B Shares, the payment of a dividend in respect of the B Shares or a combination of both. Payments made to Shareholders will be denominated in Sterling.

In conjunction with the Return of Cash, the Board will propose a discontinuation vote at the Extraordinary General Meeting.  If Shareholders vote against discontinuation, and approve the associated amendment to the Company's Articles of Incorporation, the next opportunity for Shareholders to vote on the Company's future will be no later than 31 December 2016.

In light of the above Proposals, the Board and the Manager have agreed a number of amendments to the Management Agreement.  The main consequences of the amendments will be to remove the "super-performance fee" and to amend the notice period required to terminate the Management Agreement.  As the amendments to the Management Agreement constitute a related party transaction, the amendments are subject to Shareholder approval at the Extraordinary General Meeting.

The final Sterling amount of the Return of Cash will be calculated on 4 April 2014 and will be equal to US$29 million converted into Sterling as at the close of business on that date. This sum will be divided by the number of B Shares issued by the Company to give the amount payable per B Share.

Each of the Proposals requires the approval of Shareholders which will be sought at an Extraordinary General Meeting to be held at 11.00 a.m. on 7 April 2014.  Further details of the Proposals are set out in the Appendix below.

For further information:

Company Registration Number 44813

Website: www.mpofund.com

Public Relations

MHP Communications

Simon Hockridge / Andrew Jaques / James Morgan

Tel: +44 20 3128 8100

Manager

Sniper Capital Limited

Tel: +65 6222 1440 (Investor Contact)

Tel: +853 2870 5151(Fund Adviser)

Email: info@snipercapital.com

www.snipercapital.com

Sponsor and Corporate Broker

Liberum Capital

Chris Bowman / Richard Bootle

Tel: +44 20 3100 2228

Company Secretary & Administrator

Heritage International Fund Managers

Mark Huntley / Laurence McNairn

Tel: +44 14 8171 6000

Stock Codes:

Bloomberg:    MPO LN

Reuters:      MPO.L

A copy of the Circular will shortly be submitted to the National Storage Mechanism and will shortly be available for inspection atwww.hemscott.com/nsm.do. Defined terms used in this announcement shall have the same meaning as ascribed to them in the Circular.

Appendix

1.   The Return of Cash

Background to and reasons for the Return of Cash

The proposed return of cash of US$29 million represents the net profit after post-closing reconciliation generated from the sale of the Company's logistics properties in Zhuhai for approximately US$65 million, which was completed on 21 February 2014.  The Return of Cash equates to approximately 8.4 per cent. of the Company's market capitalisation as at 11 March 2014.

Summary of the Proposals

The Board is mindful of the fact that it has a range of institutional, corporate and individual Shareholders and, as such, proposes a flexible mechanism by which the net profit received from the sale of the Zhuhai properties is returned.  Having considered the available options, the Board is proposing that the Return of Cash is effected via a B Share Scheme under which Shareholders will receive a bonus issue of a newly created class of shares, B Shares, pro rata to their holding of Ordinary Shares; cash will then be returned to Shareholders through a redemption of the B Shares, the payment of a dividend in respect of the B Shares or a combination of both (and whereby the nominal capital paid up or credited as paid up on such B Shares will be returned to Shareholders).

This method of return has been chosen as it allows Shareholders (save for certain Overseas Shareholders) to be treated equally on a pro rata basis, and gives each Shareholder (save for certain Overseas Shareholders) the choice of the form in which they wish to receive the monies paid out by the Company pursuant to the Return of Cash.  Whichever alternative is chosen, the Return of Cash will total US$29 million and, based upon the number of Ordinary Shares in issue as at 11 March 2014 and on the Illustrative Exchange Rate, will amount to approximately 21 pence per Ordinary Share.

The final Sterling amount of the Return of Cash will be calculated on 4 April 2014 and will be equal to US$29 million converted into Sterling based on the Bloomberg Cross Rate as at the close of business on that date.  This sum will be divided by the number of B Shares in issue to give the B Share Dividend and B Share Redemption Sum.

Return of Cash

(a)  B Shares

Under the Return of Cash, Shareholders will receive:

One B Share for each Ordinary Share held on the Ordinary Share Record Date.

At the closing middle-market price of 250.5 pence per Ordinary Share on 11 March 2014, the proposed Return of Cash to Shareholders represents approximately 8.4 per cent. of the Company's market capitalisation at that date.

(b)  The B Share Alternatives

Under the Return of Cash, Shareholders (other than certain Overseas Shareholders) will have the choice of the following alternatives in relation to the B Shares that they will receive following the Ordinary Share Record Date. Shareholders should read Part 5 of the Circular entitled 'United Kingdom Taxation in relation to the Return of Cash' since the two alternatives will have different UK tax consequences.

Shareholders who are in any doubt as to their tax position should consult an appropriate professional adviser.

Unless you are a US Holder you may choose:

Alternative 1: (B Share Redemption); or

Alternative 2: (B Share Dividend); or

any combination of these alternatives in respect of your B Shares. 

US Holders are only entitled to receive Alternative 2: (B Share Dividend).

Unless a Shareholder (other than certain Overseas Shareholders) returns a Dividend Election Form (or, in the case of an uncertificated Shareholder, submits a TTE Instruction) in respect of some or all of his holding of B Shares, such Shareholder will be deemed (unless the Company determines otherwise) to have elected for the B Share Redemption alternative in respect of his entire holding of B Shares.

Alternative 1: (B Share Redemption)

If you choose this alternative (or are deemed to have chosen this alternative) in respect of some or all of your B Shares, you will have those B Shares redeemed by the Company on the B Share Redemption Date at a price per B Share equal to the B Share Redemption Sum, free of all dealing expenses and commissions.

It is expected that the proceeds from this redemption will be treated as capital for United Kingdom tax purposes.

It is also expected that Shareholders who choose this alternative will have their cheques dispatched or CREST accounts credited (as appropriate) on 29 April 2014.

Alternative 2: (B Share Dividend)

If you choose this alternative (or are deemed to have chosen this alternative) in respect of some or all of your B Shares, you will receive the B Share Dividend in respect of each of those B Shares.  It is expected that this will become payable on 29 April 2014, following which those B Shares will be automatically converted into Deferred Shares and then redeemed by the Company on 30 April 2014 (or such other date as the Directors may determine).  The Deferred Shares will not be listed and will carry extremely limited rights as Shareholders will have already received a cash pay-out in relation to those shares. 

It is expected that the B Share Dividend will be treated as income for United Kingdom tax purposes.

It is also expected that Shareholders who choose this alternative will have their cheques dispatched or CREST accounts credited (as appropriate) on 29 April 2014.

US Holders are only entitled to receive Alternative 2: (B Share Dividend).

Unless you are a US Holder you may elect to receive any one of, or a combination of, the B Share Alternatives.  Alternative 1: (B Share Redemption) is not available to US Holders, who are only entitled to receive Alternative 2: (B Share Dividend).

(c) Dividend Election Form / TTE Instruction

Shareholders who wish to receive Alternative 2: (B Share Dividend) in respect of some or all of their B Shares should complete and return a Dividend Election Form or submit a TTE Instruction, as appropriate.

Details of how to complete and return your Dividend Election Form if you are a certificated Shareholder and details of how to submit your TTE Instruction if you are an uncertificated Shareholder are set out in the Circular.  Properly completed and returned Dividend Election Forms and properly submitted TTE Instructions will not become effective until 1.00 p.m. on 14 April 2014.  If Resolution 1 is not passed at the Extraordinary General Meeting, the Return of Cash will not proceed and any Dividend Election Forms or TTE Instructions received by Capita Asset Services will lapse and shall have no effect.  Resolution 1 is a special resolution and therefore requires 75 per cent of the votes cast to be in favour for it to be passed.

2.   Background to and reasons for the Discontinuation Vote Proposals

The Company's Articles of Incorporation require that an extraordinary resolution is proposed that the Company ceases to continue as presently constituted at the annual general meeting of the Company to be held following the eighth anniversary of the Company's incorporation and every fifth year thereafter.  A Discontinuation Vote is therefore required to be held at the annual general meeting later this year.

Over the past few months, the Board has considered this issue comprehensively, taking into account feedback from our investors and the Company's ongoing commitment to maximising Shareholder value.  Following this consideration and consultation, the Board has decided to bring forward the Discontinuation Vote so that it will be proposed at the Extraordinary General Meeting on 7 April 2014. 

Against the backdrop of rising capital values in Macau property and continuing favourable economic conditions, the Board sees corresponding upside potential for the Company's portfolio. Accordingly, the Board, having consulted with the Manager, considers that the best path to maximise Shareholder value is to undertake a natural realisation of the property portfolio, rather than undertake a forced realisation of the Company's assets at potentially lower valuations in the event the life of the Company was not extended beyond 2014.  If the Discontinuation Vote is passed, the Board considers there is a risk that the value obtained by Shareholders will be lower than if the Discontinuation Vote is not passed.  Accordingly, the Directors recommend that Shareholders vote AGAINST Resolution 2.

If, however, Resolution 2 is passed, the Directors are required to formulate proposals to be put to Shareholders to reorganise, unitise, reconstruct or wind up the Company.

If the Company continues, the Board intends to ensure that:

·      not less than 50 per cent of any future net profits from asset sales will be distributed to Shareholders; and

·      further acquisitions will only be considered if exceptional shorter term opportunities present themselves.

In addition to the Discontinuation Vote, Shareholders are being asked to vote on another Resolution, Resolution 3, which (if passed) would amend the Company's Articles of Incorporation so that the next Discontinuation Vote would take place no later than 31 December 2016.  This will provide the Company and the Manager with a period of over two and half years to continue the realisation of the Company's assets, which the Board and Manager consider is a realistic time horizon to allow the maximisation of the value of the Company's portfolio during a period in which Macau's property market is expected to continue its growth.

Mechanics of the Discontinuation Vote

In accordance with the Articles of Incorporation, the Discontinuation Vote will be proposed as an extraordinary resolution (Resolution 2) that the Company ceases to continue as currently constituted.  This means that Shareholders wishing the Company to continue should vote AGAINST Resolution 2. As an extraordinary resolution, Resolution 2 requires 75 per cent of the votes cast to be in favour for it to be passed.

The Directors consider the continuation of the Company as currently constituted to be in the best interests of the Company and its Shareholders and recommend that Shareholders vote AGAINST Resolution 2, as they intend to do in respect of their own beneficial shareholdings.

Amendment of the Articles of Incorporation

As a separate resolution, and conditional on the rejection of the Discontinuation Vote, we are proposing to amend the Articles of Incorporation so that the next Discontinuation Vote must be held no later than 31 December 2016.  This is intended to provide Shareholders with comfort that they will be given another opportunity to consider the future of the Company within a reasonable period, as well as giving the Manager sufficient time to maximise the value of the Company's property portfolio and effect further realisations.  If Resolution 3 is passed the Discontinuation Vote to be proposed no later than 31 December 2016 will be an extraordinary resolution, requiring a majority of 75 per cent of those voting in favour for it to be passed.

The resolution to amend the Articles (Resolution 3) is a special resolution, requiring a 75 per cent majority of votes cast to be in favour.

3.   Amendment of the Management Agreement

In conjunction with the proposals regarding the Discontinuation Vote, the Board has been considering the terms of the Management Agreement to ensure that they remain appropriate at this stage of the Company's development.  As a result, the Company has agreed with the Manager that, subject to Shareholder approval, the following amendments will be made to the Management Agreement:

·      the "super-performance fee", which provided for the Manager to receive a performance fee, in addition to the basic performance fee, of an additional 15 per cent of gains over the hurdle rate that exceeded 25 per cent per annum (on a compounding basis) will be removed.  The basic performance fee, which provides a fee of 20 per cent of all gains in excess of the basic hurdle rate of 10 per cent per annum (on a compounding basis) will remain; and

·      conditional on the rejection of the Discontinuation Vote at the Extraordinary General Meeting, the Management Agreement will no longer be able to be terminated by either the Company or the Manager without cause until the date of the next Discontinuation Vote, which, if Resolution 3 is passed, will be no later than 31 December 2016.  The existing provisions allowing both the Company and the Manager to terminate the Management Agreement without cause on giving not less than 12 months' written notice to the other will be removed.

The Directors believe that the super-performance fee should be removed given that the Manager is already appropriately incentivised by the basic performance fee. Also, given the low likelihood of the Manager achieving the super-performance fee the Directors believe that its removal from the incentivisation structure of the Manager will provide greater clarity to investors on the fee entitlement of the Manager going forward.

The Directors also believe that the Company will benefit from ensuring that the Manager is contracted to continue to manage the Company's portfolio until the date of the next Discontinuation Vote.  The Manager has been in place since the Company's launch and the Directors believe that securing its services until December 2016 is in the best interests of the Company and Shareholders.  As a result, the Company and the Manager have agreed that the provisions allowing the Management Agreement to be terminated without cause on 12 months' notice will be removed and the Company will have the opportunity to terminate the Management Agreement without cause at the time of the Discontinuation Vote in 2016.

Under the Listing Rules, the amendment of the Management Agreement constitutes a related party transaction.  It therefore requires the approval of Shareholders, by ordinary resolution, with the Manager and its related parties abstaining from the vote.  Resolution 4, to be proposed at the Extraordinary General Meeting, will, if passed, approve the amendments to the Management Agreement described above.

If Resolution 4 is passed, the amendment regarding the notice period and the removal of the "super-performance fee' will take effect immediately.

4.   Extraordinary General Meeting

Your approval is being sought for each of the Proposals.

Notice of an Extraordinary General Meeting which has been convened for 11.00 a.m. on 7 April 2014 for this purpose is set out in Part 11 of the Circular posted today.  A Form of Proxy to be used in connection with the Extraordinary General Meeting is enclosed with the Circular.

Sniper Investments Limited, which is an associate of the Manager, has provided an irrevocable undertaking that it will vote in favour of Resolutions 1 and 3, against Resolution 2 and, in accordance with the Listing Rules, will refrain from voting on Resolution 4.  Sniper Investments Limited holds 11.24 per cent of the Company's issued share capital as at the date of this announcement.

5.   Expected timetable of principal events