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Vietnam Opp Fund Ltd (VOF)

  Print      Mail a friend       Annual reports

Tuesday 30 March, 2004

Vietnam Opp Fund Ltd

Interim Results

Vietnam Opportunity Fund Limited
30 March 2004



                        Vietnam Opportunity Fund Limited
(an exempted company incorporated in the Cayman Islands with registration number
                                  CR - 124038)

Directors

Jonathan Choi Chairman and Non-Executive Director
Mr. Choi is President of Sun Wah Group, a Hong Kong based property, financial
services, technology, infrastructure, media and food-stuff conglomerate, and
Chairman of Kingsway International Holdings, a Toronto listed company, and SW
Kingsway, a Hong Kong listed investment bank and fund manager. He is also the
Vice Chairman of the Chinese General Chamber of Commerce in Hong Kong and a
member of the National Committee of the Chinese Peoples' Political Consultative
Conference (CPPCC) of the People's Republic of China. Mr. Choi has been an
active investor in Vietnam since 1971.

Horst Geicke Non-Executive Director
Mr. Geicke is a co-founder and Chairman of ACL Holdings Ltd., a China focused
private equity fund with US$100 million invested over the past seven years, as
well as a founder of a manufacturing and trading business with sales of over
US$500 million. He is also the significant shareholder of Pacific Alliance Group
Holdings Limited and a director of VinaCapital Group Limited, respectively, the
ultimate and immediate parent companies of VinaCapital Investment Management
Limited. He is President of the German Chamber of Commerce in Hong Kong, a
director of the German Chamber of Commerce in Vietnam and a founding member and
adviser to the Hong Kong - Thailand Business Council. Mr. Geicke has over 22
years experience of operating and investing in Asia and in particular has
significant experience investing in Vietnam having made seven direct investments
in Vietnam over the past two years.

Robert Knapp Non-Executive Director
Mr. Knapp is a Managing Director of Millennium Partners L.P., a US$4 billion
multi-strategy investment fund that seeks to provide absolute returns with
minimal risk and is the Fund's largest shareholder. Mr. Knapp's investment focus
is undervalued assets, turnaround situations and emerging markets arbitrage. He
has previously led Millennium's efforts to restructure poorly performing listed
investment funds in the US, Europe and Asia.

Advisory Committee

The Manager has established an advisory committee which consists of local
investment specialists, business leaders and existing and former government
officials as it deems appropriate to supplement the expertise of management
team. Excluding the Fund's Chairman Jonathan Choi, there are currently four
appointees to the advisory committee:

Douglas Hui
Dr. Douglas Ching Shan Hui, currently Managing Director of Sun Wah Media
Limited, holds directorships in various listed companies in Hong Kong and
Canada. Prior to joining the Sun Wah Group, he held senior positions in several
local and international merchant banks. He holds a Bachelor Degree in Social
Science from the University of Hong Kong, a Master Degree in Business
Administration from the University of Toronto (Dean List and Fellowship Award),
and a Doctor Degree of Business Administration from the University of South
Australia. Dr. Hui is also a Certified Management Accountant of Canada (Dick
Dawson Award) and a member of the Hong Kong Institute of Company Secretaries.

Bruno Schoepfer
Mr. Schoepfer joined Movenpick Holding in 1997 as Managing Director of its Asia
Pacific regional operations and was Chief Executive Officer and Managing
Director of the Group from 1998 to 2003. Mr. Schoepfer is currently Chairman of
Movenpick Hotel and Resorts S.A., a Swiss premium hospitality company active in
the 5-star hotel and 4-star business and airport hotel markets as well as a
well-known hotel and restaurant brand in Europe. Prior to joining the Movenpick
Group, Mr. Schoepfer already enjoyed a distinguished career in luxury hotel
management in Asia Pacific and Europe for over 20 years. He has previously held
senior positions in various leading international hotel groups including
Mandarin Oriental, Shangri-la, and Radison-SAS.

Chanthol Sun
Mr. Sun is President of SC Investment Co. Ltd., which provides investment
consultancy services in Cambodia, and is the Economic and Finance Advisor to the
President of the National Assembly of Cambodia. Mr. Sun was formerly Cambodia's
Secretary of State for Economy and Finance and Secretary General of the Council
for the Development of Cambodia. Mr. Sun previously spent 16 years with General
Electric in various senior management positions and was a former member of the
board of Royal Air Cambodia. Mr. Sun is a member of the executive board of
Wharton Asia, and holds a BBSA from the American University, an AMP from the
Wharton School of the University of Pennsylvania and an MPA from the Kennedy
School of Government of Harvard University.



Administration

The Vietnam Opportunity Fund Limited (VOF or the Fund) is listed on the London
Stock Exchange Alternative Investment Market (AIM). Price information is
available on Reuters and Bloomberg.

The Company                                   Investment Manager
Vietnam Opportunity Fund Limited              VinaCapital Investment Management
                                              Limited
P.O. Box 309GT                                Unit 1703, Sun Wah Tower
Ugland House                                  115 Nguyen Hue Boulevard, District
                                              1
South Church Street                           Ho Chi Minh City
George Town                                   Vietnam
Grand Cayman
Cayman Islands

Custodian, Administrator and Registrar/       Nominated Adviser
Receiving Agent
HSBC Trustee (Cayman) Limited                 Grant Thornton Corporate Finance
Strathvale House                              Grant Thornton House
North Church Street                           Melton Street
George Town                                   Euston Square
Grand Cayman                                  London, NW1 2EP
Cayman Islands                                United Kingdom


Broker                                        Auditors
Collins Stewart Limited                       Grant Thornton (Vietnam) Ltd.
9/F, 88 Wood Street                           15th Floor, Bitexco Building
London, EC2V 7QR                              19-25 Nguyen Hue, District 1
United Kingdom                                Ho Chi Minh City
                                              Vietnam
Legal Advisers
(English Law)
Lawrence Graham
190 Strand
London, WC2R 1JN
United Kingdom

(Vietnamese Law)
Baker and McKenzie
12/F Saigon Tower
29 Le Duan Boulevard, District 1
Ho Chi Minh City
Vietnam

(Cayman Islands Law)
Maples & Calder
Ugland House
P.O. Box 30967
South Church Street
George Town
Grand Cayman
Cayman Islands

Chairman's Statement

We are pleased to present the first interim report for the Vietnam Opportunity
Fund Limited (VOF) for the period ended 31 December 2003.

This is the first quarter VOF has been incorporated as a closed-end, Cayman
Islands registered, exempted company. The shares were admitted to trading on the
Alternative Investment Market of the London Stock Exchange on 30 September 2003.
With respect to investments made as of 31 December 2003, the Fund has three
investment holdings to account for 28.77 percent of the Fund's net assets, two
of which were made as pre-investments prior to Admission to AIM and the third is
an investment made on 31 December 2003 in a recently privatized state-owned
enterprise.

We believe now is the right time to invest in Vietnam. Vietnam still offers some
of the lowest valuations in the region while having a positive macro-economic
environment: the second fastest growth rate in Asia, a young motivated and
entrepreneurial workforce, and supportive Government reforms. As one can see
from the first wave of Vietnamese investment funds during the mid-1990s, many
were unsuccessful due to a number of factors such as poor timing and lack of
legislation to support foreign investment. The economic environment is now
significantly different with the recently revised Enterprise Law in 2002 having
been a strong catalyst for the robust increase in private domestic investments.
Foreign investors are now able to participate in most economic sectors, and
Vietnam's integration into the world economy is clearly underway.

The Fund's strategy is to seek value in key growth sectors within Vietnam's
domestic economy. Vietnam is now witnessing increased investment in a number of
areas ranging from private companies including former state-owned enterprises to
public entities. Vietnam now has the same GDP per capita as China did in 1995
and a comparable growth rate with similar Government reforms in process. We
believe there is a great deal to be learnt from China's development, and that
investors can benefit from such lessons by entering the Vietnamese market at
this stage.

VOF expects to make investments in the near future into a number of market
leaders trading on the Ho Chi Minh City Stock Trading Center (STC). We
anticipate a strong backlog of investment opportunities for 2004, including
publicly traded securities on the STC. The STC is currently still in its early
stage of development with 22 companies listed at a total market capitalization,
excluding bonds, of nearly US$142.3 million, or approximately 0.4 percent of
nominal GDP, as of 31 December 2003.

Economic Outlook

2003 was a watershed year for Vietnam with far-reaching economic reforms
positively impacting numerous industries to spur impressive GDP growth of 7.2
percent - second in the world only to China's 9.1 percent. With a Government
target for 2004 GDP growth rate set above 8 percent and intended WTO accession
for 2005, Vietnam is expected to continue its charge toward economic expansion
in the coming year.

Industrial production output for 2003 was approximately US$20.2 billion, or an
annual growth rate of 16 percent. Industrial revenues contributed an estimated
39 percent to 2003 GDP while services revenues were level at 38.5 percent. The
non-state sector posted the highest industrial value growth rate of 18.7
percent, followed by the foreign-invested and state-owned sectors with 18.3
percent and 12.4 percent, respectively.

In conclusion, we believe the outlook for Vietnam is positive and we would like
to thank every one of you for your contributions to the start-up of the Fund
from the very beginning. We have a strong pipeline of investments for 2004 and
look forward to sharing our progress with investors through quarterly updates.

Investment Manager's Report

Portfolio Summary

The NAV decreased 5 percent during the period to $0.95. The decline in the NAV
was directly attributable to start up and operating expenses for the Fund.
However, foreign exchange gains from the Fund's holdings in Euro helped temper
the NAV against the decline of the USD.

Since inception on 24 September 2003, VOF ended the period with 28.77 percent of
its funds invested, with holdings in three Vietnamese enterprises. Two
companies, AA Land and KiDos Ice Cream, representing 12.18 percent of the Fund's
net assets, are unlisted and valued at initial cost, while the remaining stake,
Vinamilk, is a privatized state-owned enterprise (SOE) trading in the unofficial
'over the counter' (OTC) market, accounting for 16.59 percent of the Fund's net
assets.
Total net cash was $6.84 million, or 75.76 percent of net assets. Total
operating income for the period, primarily from interest gain and currency
fluctuation, was 0.94 percent of net assets. Total operating expenses were held
at 6.12 percent, which were mainly expenses related to the set up of the Fund.
With VOF now fully established, the Board of Directors anticipates going forward
that operating expenses will be approximately 2.0 percent of net assets.






New Investments

VOF made one addition to the portfolio during the period with an investment in
Vinamilk, a newly privatized state-owned enterprise.

Private Holdings

VOF has two investments in private companies. Through subsidiaries, VOF
currently holds a 30 percent interest in KiDos Ice Cream Corporation, and a
29.44 percent interest in AA Land.

KiDos Ice Cream

KiDos Ice Cream is the repurchased assets of Unilever's Walls ice cream
operations. VOF acquired 30 percent of the Company for US$500,000. The
transaction was listed sixth on the Saigon Times Club's 2003 ranking of top 10
corporate events in Vietnam.

Since the ownership change in July, the Company has employed primary market
research to re-identify customers and to optimize its product mix for the launch
of its new brand. During September and October 2003, KiDos Ice Cream introduced
its line of carton-based ice cream products to the market, including the three
basic varieties of chocolate, vanilla and strawberry as well as additional
flavors suited to local tastes. KiDos Ice Cream is now sold in all major
supermarkets in Ho Chi Minh City (HCMC) and Hanoi.

Strategic plans for 2004 are primarily focused on the roll out of premium
carton-based products, which will increase the Company's production to 28 SKUs
under the KiDos brand. In addition, approximately 12 SKUs of the Walls Ice Cream
brand will be eliminated, reducing the remaining Walls production count to 16
SKUs by June 2004. Moreover, KiDos will continue to deploy its cost reduction
strategy and to embark on a new sales incentive scheme for distributors as well
as to explore new channels to enhance its revenue stream for 2004.

KiDos Ice Cream has already achieved significant results during the initial
transition period under new ownership and management. For the six months from
July to December 2003, KiDos reported unaudited net profit of approximately 3.5
percent on sales of about US$2.6 million. Year-on-year sales dropped 17.4
percent due to lower advertising and promotional expenditure while the Walls
brand is slowly being phased out. Consequently, advertising and promotion for
the Walls brand has been reduced significantly, whereas advertising and
promotion for the new KiDos brand has not fully ramped up due to low season.
Significant promotional activities for the new brand are planned for Q2 and Q3
2004, which should see sales start to rebound.

P&L (US$ 000)                        Jul - Dec 2003            Jul - Dec 2002
                                         ----------                ----------
Sales                                        2,593                      3,141
EBIT                                            89                       (492)
EBIT Margin                                    3.4%                    -15.7%
                                          ----------               ----------
Net Profit                                      91                       (793)
                                          ==========               ==========
Net Profit Margin                              3.5%                    -25.2%
Source: Company financial statements




AA Land

VOF acquired 29.44 percent interest in AA Land for US$600,000. AA Land is
involved in the development and project management of real estate projects in Ho
Chi Minh City. The strategy of AA Land is to minimize capital commitments by
taking fees and carried interests and to realize projects within 2-4 years. If
successful, the investment in AA Land will allow VOF to participate in the HCMC
real estate market without major capital exposure.

It currently has three projects underway:

1. Prudential. This is a 70/30 joint venture with Prudential Insurance for an
office building in Chinatown of Ho Chi Minh City. Prudential has contractually
committed to be the 100 percent occupant during the 40 year life of the joint
venture. The land is owned freehold by AA Land and leased to the joint venture.
Final interior fit-out work is now underway and the project is targeted for June
2004 completion. AA Land will seek to realize this investment upon completion.

2. Hai Ba Trung Court. This is a small luxury serviced apartment complex
intended for completion in April 2004. AA Land owns 55 percent of the project
with the remaining interest held by the state-owned enterprise, Ben Thanh
Tourist Corporation.

3. Kycon Condos. AA Land owns 80 percent of a project to develop a piece of land
located in District One into luxury apartments for sale. The other 20 percent is
owned by Ben Thanh Tourist. Most approvals for the commencement of construction
are in place, with a start date scheduled for mid-2004 following completion of
detailed design work. AA has secured for this project a major investment from
Bao Viet Insurance, the largest insurance company in Vietnam.

Privatized Holdings

The Fund holds VOF Investment Ltd., which recently acquired a 0.33 percent stake
in Vinamilk, a newly privatized state-owned enterprise.

Vietnam Dairy Products Company

On 29 December 2003, VOF purchased 50,000 shares of Vietnam Dairy Products
Company (Vinamilk) at VND 154,000 (approximately US$9.83) per share. With a
total investment of US$499,775, VOF presently holds 0.33 percent interest in
Vinamilk.

Vinamilk was granted approval in October 2003 from the Ministry of Industry to
undergo privatization from a state-owned enterprise into a joint stock company.
As the largest SOE to be privatized in 2003, Vinamilk had VND 1.5 trillion
(US$95 million) in chartered capital at the time of offering, of which the State
retained 80 percent of issued shares with the remaining sold to employees (12.54
percent), dairy farmers (2.66 percent) and the public (4.80 percent). Aside from
VOF, two additional foreign investors participated in the recent share issue at
a valuation range of VND180,000 - 185,000 (approximately US$11.61 - 11.94) per
share.

As one of Vietnam's largest and most successful SOEs with total assets of
approximately US$158 million, Vinamilk is also the market leader with 75 percent
share of the domestic processed dairy products market. The Company posted 2003
revenue of US$245.8 million, which was a 19.5 percent decrease compared to 2002.
Although domestic sales increased 27 percent, total revenue for 2003 was
severely impacted by the ongoing war in Iraq, which resulted in a 50 percent
decline in Vinamilk's sales to the Middle East, a major export market for the
Company. However, the Company reported 2003 net profit of US$32.5 million, which
is a 13.2 percent increase compared to 2002. The increase in net profit was
derived from non-operating income, including interest and investments, which
totaled approximately US$6.4 million.

 P&L (US$ MM)        2000     2001     2002       2003       2004E      2005E
 Revenue            169.6    254.3    305.3      245.8       184.5      238.7
 Y/Y Growth            NA     50.0%    20.0%    -19.5%      -24.8%       29.4%
 Gross Profit        36.1     38.7     86.6       73.7         N/A        N/A
 Gross Margin        21.3%    15.2%    28.4%        30%
 EBIT                23.0     20.6     42.9       52.4         N/A        N/A
 EBIT Margin         13.6%     8.1%    14.1%      21.3%
                     ------   ------   ------    -------      ------     ------
 Net Profit          13.0     12.8     28.7       32.5        29.4       37.2
                     ======   ======   ======    =======      ======     ======
 Net Profit Margin    7.7%     5.0%     9.4%      13.2%       15.9%      15.6%
 ROE                 21.6%    17.9%    29.6%      20.3%        N/A        N/A
 Source: Public audited financials, Company reports

Vinamilk exports its portfolio of over 160 products to the US, Middle East and
other Asian countries. Total export volume for 10 months of 2003 was US$50
million. The Company continues to invest in operations, including a planned
deployment of US$85 million over the next two years to expand its current
production facility and to construct a new milk factory, concentrated fruit
juice plant and milk brewery.

Milk consumption per capita in Vietnam has increased from 0.47 liters per capita
since the early 1990s to 6.8 liters in 2001. Although the demand for milk and
dairy products has increased over the last few years due to improvements in
living standards and increased awareness of health benefits, consumption volume
in Vietnam is still low compared to other countries such as Malaysia (34 liters
per capita), Thailand (27 liters), and European countries (up to 50 liters).

At present, Vietnam's milk consumption is estimated to be growing at 20 percent
per annum. However, the domestic milk production in 2003 was approximately
90,000 tons, meeting only 13 percent of domestic demand while the remaining
consumption needs were met with imported products. Accordingly, Vietnam intends
to increase its domestic dairy farming industry over the next two years to meet
the local demand for fresh milk. The Government intends to increase total milk
production to 165,000 tons in order to meet 20 percent of domestic demand by
2005 and 40 percent by 2010.

As new international players enter Vietnam, local milk and dairy producers are
expected to be negatively impacted by market share loss. To mitigate the
impending situation, the Ho Chi Minh City Government has proposed to turn the
local dairy sector into a key industry in accordance with State plans. During
the initial phase, the HCMC Government acquired a majority of the 10,800 dairy
cows imported from Australia and New Zealand in 2003 to develop the local dairy
farm sector.

To lead the domestic market growth for processed dairy goods, Vinamilk will
continue to deploy its low-cost mass market strategy to maintain overall market
position in addition to possibly acquiring smaller producers to expand its
reach. Although the projected revenues for 2004 and 2005 are less than in recent
years, the Company intends to maintain domestic sales growth of 10 percent per
annum while increasing net profit margin to 15 percent through improved gross
margins. As a newly minted joint stock company, Vinamilk intends to restructure
its management and human resources to operate more efficiently. In addition, the
Company also plans expand into more export markets in order to account for the
loss in volume from the Middle East.

VIETNAM OPPORTUNITY FUND
STATEMENT OF ASSETS AND LIABILITIES (unaudited)
AT 31 DECEMBER 2003 (US$)

ASSETS                                                       Note
  Investments, at value (cost $2,600,000)
    Vietnam Investment Property Holdings Ltd.(KiDos Ice               $600,000
    Cream)
    Vietnam Investment Ltd. (AA Land)                                  500,000
    VOF Investment Ltd. (Vinamilk)                                   1,498,694
                                                                       ---------
                                                                       ---------
  Total investment holdings                                     3    2,598,694
  Cash and foreign currency                                          6,842,957
  Dividends and interest receivable                                        245
  Prepaid expense                                                       42,192
                                                                       ---------
    Total Assets                                                    $9,484,088
                                                                       =========
                                                                       =========

LIABILITES
  Fund set up fee payable                                             $359,717
  Accrued nominated adviser fees                                         7,230
  Accrued broker fees                                           8        7,230
  Accrued custodian fees                                        8        4,882
  Accrued directors fees                                        8       10,569
  Accrued investment advisory fee                               8       61,696
  Other accrued expenses and payables                                      796
                                                                       ---------
                                                                       ---------
    Total Liabilities                                                 $452,119
                                                                       ---------

NET ASSETS                                                          $9,031,968
                                                                       =========

NET ASSETS consist of
  Par value, $0.01 per share                                    6      $95,000
  Paid-in capital in excess of par value                             9,405,000
  Undistributed net investment income                                   20,432
  Accumulated net realized loss on operations                         (552,816)
  Net unrealized appreciation of foreign currencies                     64,352
                                                                       ---------
    Total Net Assets                                                $9,031,968
                                                                       =========
                                                                       =========

NET ASSET VALUE, price per share
(9,500,000
shares of
common stock
issued)                                                         7        $0.95
                                                                       =========












VIETNAM OPPORTUNITY FUND
STATEMENT OF OPERATIONS (unaudited)
FOR THE PERIOD ENDED 31 DECEMBER 2003

INVESTMENT INCOME                                       Note
   Interest                                                4           $20,432
                                                                       ---------
                                                                       ---------
             Total Investment Income                                   $20,432

EXPENSES
   Set up expenses                                                    $460,393
   Investment advisory fee                                 8            61,696
   Directors' fees and expenses                            8            10,569
   Transfer agent fees                                     8             7,230
   Legal and audit fees                                                  7,230
   Custodian fees                                          8             5,425
   Administration and accounting fees                                      274
                                                                       ---------
             Total Expenses                                           $552,816
                                                                       ---------
                                                                       ---------

NET OPERTATING LOSS                                                   $532,383

UNREALIZED GAIN ON INVESTMENTS
   Net unrealized appreciation of:
             Securities                                                    $ -
             Foreign currencies and net other assets       5            64,352
                                                                       ---------
                                                                       ---------
   Net unrealized appreciation of investments                          $64,352
                                                                       ---------

NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS                                            9          $468,032
                                                                       =========






VIETNAM OPPORTUNITY FUND
STATEMENTS OF CHANGE IN NET ASSETS (unaudited)
FOR THE PERIOD ENDED 31 DECEMBER 2003

                                                   Six Months Ended 12/31/2003
                                                           ------------
Net investment
income                                                                 $20,432
Net realized
loss on
operations
during the
period                                                                (552,816)
Net unrealized
appreciation
of foreign
currencies
during the
period                                                                  64,352
                                                                    ------------
Net decrease
in net assets
resulting from
operations
during the
period                                                               $(468,032)

Distributions:
  Dividends to shareholders from net investment                              -
  income
  Distributions to shareholders from net realized                            -
  gain on investments
Net increase (decrease) in net assets from Fund                              -
share transactions                                                  ------------
Net increase (decrease) in net assets                                        -

NET ASSETS
Beginning of
period                                                               9,500,000
                                                                    ------------
End of period                                                       $9,031,968
                                                                    ============







VIETNAM OPPORTUNITY FUND
NOTES TO THE FINANCIAL STATEMENTS (unaudited)
FOR THE PERIOD ENDED 31 DECEMBER 2003

1.       THE FUND

The Vietnam Opportunity Fund is a closed end investment company incorporated as
an exempted company registered in Cayman Islands on 14 March 2003. It commenced
operations on 24 September 2003, which established VOF as a 2003 vintage fund.

The principle investment objective of the Fund is to achieve medium to long-term
capital appreciation as well as to generate regular income by investing in
listed and unlisted companies, debt, assets and other investment opportunities
in Vietnam and neighboring Asian countries. It is currently anticipated that any
gains will be distributed to shareholders as dividends on an annual basis.

The shares of the Fund are listed on London Stock Exchange Alternative
Investment Market (AIM). The Fund has been established with no fixed life but
the Board of Directors of the Fund (BOD) considers it desirable that
shareholders should have the opportunity to review the future of the Fund at
appropriate intervals.

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of accounting
The financial statements have been prepared under International Financial
Reporting Standards. Under the International Financial Reporting Standards, the
Fund will prepare a Statement of Operations which, unlike the total returns,
does not differentiate between revenue and capital and also includes net
investment gains. The Fund's investment management and administration fees and
all other expenses will be charged through the Statement of Operations.
Statement of Assets and Liabilities has been prepared in accordance with the
historical cost convention.

Translation of foreign currencies
The Fund presents the financial statements in United States dollars ('US$'). All
assets and liabilities denominated in foreign currencies at the balance sheet
date are translated into United States dollars at the nominated exchange rates
at that date.

Transactions in foreign currencies occurring during the year are translated into
United States dollars at any officially set exchange rate of the transaction
dates. Realized or unrealized gains or losses are dealt with in the Statement of
Operations.

Revenue recognition
Revenue is recognized when it is probable that the economic benefits will flow
to the Fund and when the revenue can be measured reliably, on the following
basis:

Interest income is recognized on a time proportion bases taking into account the
principle outstanding and the effective interest rate applicable.

Investments
Individual investments will be realized when the BOD believes the realization
would be in the best interest of the Fund, which will ideally be within a five
year time frame from the date of establishment of the Fund.

All investments are initially recognized at cost, being the consideration given
and including acquisition charges associated with the investments. Investments
are subsequently re-measured at fair value.

Listed investments are valued based on the last traded prices on the principal
stock exchange where the securities are traded, provided that any such
securities that are not freely transferable, not regularly traded, for any other
reason subject to limited marketability, shall be valued at a discount. The
amount of such discount is determined by the BOD in the absolute discretion or
in a manner approved by the BOD.

Unlisted investments, which are actively traded on the 'over-the-counter' (OTC)
market, are stated at fair value based on price and market analysis of at least
two independent brokers.

Unlisted investments will initially be valued at historical cost, including any
expenses relating to the respective acquisition.

A revaluation of unlisted investments to a value in excess of or below cost may
be made in the circumstances provided by and in accordance with the guidelines
issued by the British Venture Capital Association or any other successor.
Otherwise, they are revalued if there has been a revaluation event in relation
to the holding which is considered relevant by the directors, or if there has
been no such revaluation event, they are stated at cost, less any impairment
losses in consideration by the BOD. The BOD will determine the impairment losses
after giving consideration to cost, market conditions, current and projected
operating performance and expected cash flows. The impairment losses are
recognized in the Statement of Operations as they occur. Because of the
uncertainty of the valuations, the Directors' estimated values may differ
significantly from the values of such investments in the market.

Unrealized gains or losses from the changes in fair value of the investments are
recognized in the Statement of Operations as they occur. Realized gains or
losses are dealt with in the Statement of Operations.

Cash and cash equivalents
Cash in hand or on deposit, bills and demand notes and accounts receivables
denominated in US dollars shall be deemed to the full amount thereof, unless in
any case the Directors shall have determined that the same is unlikely to be
paid or received in full, in which case the value thereof shall be arrived at
after making such discount as the directors may consider appropriate in such
case to reflect to true value thereof.

Any value other than in US dollars shall be translated at any officially set
exchange rate or appropriate spot market rate as the Directors deem appropriate
in the circumstances having regard, inter alia, to any premium or discount that
may be relevant and to costs of exchange.

3.       INVESTMENTS, AT VALUE
As of 31 December 2003 (US$)

Vietnam Investment Property Holdings Ltd. 1                           $600,000
Vietnam Investment Property Ltd. 2                                     500,000
VOF Investment Ltd. 3                                                1,498,694
Related legal and transaction fees                                       1,306
                                                                       ---------
Total investment holdings, at cost                                  $2,600,000
                                                                       =========



Notes:

(1) The Fund held Vietnam Investment Property Holdings Ltd. which owns 29.44
    percent interest in AA Land.
(2) The Fund held Vietnam Investment Property Ltd. which owns 30 percent
    interest in KiDos Ice Cream Corporation.
(3) The Fund held VOF Investment Ltd. which owns 0.33 percent interest in
    Vinamilk in the amount of US$499,775. The initial capitalization of VOF
    Investment Ltd. is $1,500,000 reflects the US$1,306 in related set up costs 
    and the cash of US$998,919.

Investments are comprised of the following:

Private investments
Cost                                                                $1,097,000
Unrealized gains/losses                                                      0
                                                                       ---------
                                                                    $1,097,000
                                                                       ---------
Privatized investments
Cost                                                                 $ 499,775
Unrealized gains/losses                                                      0
                                                                       ---------
                                                                     $ 499,775
                                                                       ---------
Total investments                                                   $1,596,775
                                                                       =========

Private investments

As of 31 December 2003, the Fund had the following investments:

Investment   Industry      Type    Quantity      Cost      Market Value   % Individual Investment   % of Net Asset
------------ ----------    ------  ----------    ------    -------------        -------------        -------------
KiDos Ice
Cream        Food         Shares    693,000     $497,000       $497,000                     30.00             5.50
             processing
AA Land      Property     Shares    600,000      600,000        600,000                     29.44             6.64
                                                   -------        -------                                    -------
     Total                                    $1,097,000     $1,097,000                                      12.14
                                                   =======        =======                                    =======

Notes:
(1)     The Fund held Vietnam Investment Property Ltd., which owns 30 percent
        interest in KiDos Ice Cream Corporation. KiDos Ice Cream is a pre-
        investment holding, which was transferred via an asset swap. The 
        investment was acquired for a consideration of US$447,000 plus related 
        acquisition cost of US$50,000.
(2)     The Fund held Vietnam Investment Property Holdings Ltd., which owns
        29.44 percent interest in AA Land at a value of US$600,000.

Privatized investment

As of 31 December 2003, the Fund had one privatized investment:

Investment   Industry    Type    Quantity     Cost     Market Value   % Individual Investment   % of Net Asset
------------ ----------  ------  ----------   ------   -------------        -------------        -------------
Vinamilk     Dairy      Shares     50,000   $499,775       $499,775                      0.33             5.53
             products

Note:
The Fund held VOF Investment Ltd., which owns 0.33 percent interest in Vinamilk
purchased on the OTC market from the Military Bank of Vietnam.


4.       NET INVESTMENT INCOME

The amount of net investment income as of 31 December 2003 of US$20,432 is the
interest income from fixed and non-fixed deposits in bank. Among these, there is
an amount of US$2,471 converted from the Euro at an exchange rate of 1.23637.

5.       UNREALIZED GAIN ON INVESTMENT

The amount of US$64,352 accounts for unrealized gain on investment as a result
of the exchange fluctuation of cash in bank.

6.       ISSUED CAPITAL
31 December 2003 (US$)

Authorized:
50,000,000 ordinary shares of US$0.01 each                            $500,000
Issued, allotted:
9,500,000 ordinary shares of US$0.01 each                              $95,000

7.       NET ASSET VALUE PER SHARE

The calculation of the net asset value per share is calculated based on the net
asset attributable to the shares as at 31 December 2003 of US$9,301,968.83 or
US$0.95 per share.

8.       FEES

The management and performance fees are calculated based on the net asset value
of the Fund.
Management fee
VinaCapital is entitled to receive an aggregate annual fee from the Fund payable
monthly in arrears at the rate of 2.5 percent of the net asset value of the
Fund.

Performance fee
VinaCapital is also entitled to a performance fee amounting to 20 percent of the
returns received by the Fund in respect of individual investments over an
annualized hurdle rate of 10 percent compounded for each year or fraction of the
year during which such investments are held.

Investment Management Agreement
The Investment Management Agreement contains an indemnity in favor of the
Manager against claims by third parties except to the extent that the claim is
due to the negligence, willful default or fraud of the Manager or any party to
whom the Manager has delegated any of its functions.

The Agreement may be terminated by either party giving to the other not less
than six months' notice expiring on or at any time after the second anniversary
of the commencement date of the Agreement or otherwise in circumstance (inter
alia) where one of the parties has a receiver appointed over its assets or if an
order is made or an effective resolution passed for the winding-up of one of the
parties.

Directors' fee
The fees payable to the Chairman and the other Directors are subject to the
amount of $10,000 each per annum. These fees may be waived at the discretion of
each Director.

Custodian, Administration and Registrar fee
HSBC is appointed as custodian of the assets of the Fund and as registrar and
administrator of the Fund. HSBC is entitled to receive an annual fee from the
Fund of the higher of US$18,000 or 0.08 percent of Net Asset Value per annum
with regard to the custody services to be provided and an annual fee of $2,000
for registrar services.

9.       TAXATION

Under the law of the Cayman Islands, the Fund is not required to pay any tax to
be levied on profits, income, gains or appreciations and in addition, no tax to
be levied on profits, income, gains, or appreciations or which is in the nature
of estate duty or inheritance tax on the shares, debentures or other obligations
of the Fund or by way of withholding in whole or part of a payment of dividend
or other distribution of income or capital by the Fund to its members or a
payment of principal or interest or other sums due under a debenture or other
obligation of the Fund.

The only Government charge to the Fund in the Cayman Islands is an annual charge
calculated on the nominal value of the authorized share capital of the Fund
which will not exceed $660 per annum at current rates.

Under Vietnamese laws, upon remitting profits and dividends abroad or retaining
profits abroad (including gains made on capital transfers), the Fund is subject
to the tax on the amounts remitted at the rates ranging from 3 to 7 percent.
However, the profit remittance tax has been removed effective 1 January 2004 in
accordance with the newly introduced Law on Business Income Tax.

If the Fund disposes of its interest in its BVI subsidiaries, any gain will not
be subject to income tax or capital gains tax.

10.   REPORT DISTRIBUTION

Copies of the report have been sent to shareholders and will also be available,
free of charge, from the offices of Grant Thornton Corporate Finance, Grant
Thornton House, Melton Street, Euston Square, London NW1 2EP or VinaCapital
Investment Management Limited, Unit 1703, Sun Wah Tower, 115 Nguyen Hue
Boulevard, District 1, Ho Chi Minh City, Vietnam, for a period of 30 days from
the date of the report.




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