VinaCapital Vietnam Opportunity Fund Regulatory News (VOF)

VINACAPITAL VIETNAM OPPORTUNITY FUND LIMITED

Annual Report and Financial Statements for the year ended 30 June 2022

COMPANY STRUCTURE AND LIFE

The Company is a Guernsey domiciled closed-ended investment company. The Company is classified as a registered closed-ended Collective Investment Scheme under the Protection of Investors (Bailiwick of Guernsey) Law, 2020 and is subject to the Companies (Guernsey) Law, 2008, as amended (the "Guernsey Law"). Prior to March 2016 the Company was a limited liability company incorporated in the Cayman Islands.

The Company is quoted on the Main Market of the LSE with a Premium Listing (ticker: VOF).

The Company does not have a fixed life, but the Board considers it desirable that shareholders should have the opportunity to review the future of the Company every fifth year, by way of voting on a special resolution proposing that the Company ceases to continue. The next such resolution will be put to the Company's annual general meeting in December 2023. For further information, please refer to the section headed "Life of the Company".

INVESTMENT POLICY

Investment Objective

The Company's objective is to achieve medium to long-term returns through investment in assets either in Vietnam or in companies with a substantial majority of their assets, operations, revenues or income in, or derived from, Vietnam.

Investment Policy

All of the Company's investments will be in Vietnam or in companies with at least 75% of their assets, operations, revenues or income in, or derived from, Vietnam at the time of investment.

● No single investment may exceed 20% of the NAV of the Company at the time of investment.

● The Company may from time to time invest in other funds focused on Vietnam. This includes investments in other funds managed by VinaCapital Investment Management Limited (the "Investment Manager" or "VinaCapital"). Any investment or divestment of funds managed by the Investment Manager will be subject to prior approval by the Board.

● The Company may from time to time make co-investments alongside other investors in private equity, real estate or similar assets. This includes, but is not restricted to, co-investments alongside other funds managed by the Investment Manager.

● The Company will not invest in other listed closed-ended funds.

The Company may gear its assets through borrowings which may vary substantially over time according to market conditions and any or all of the assets of the Company may be pledged as security for such borrowings. Borrowings will not exceed 10% of the Company's total assets at the time that any debt is drawn down.

From time to time the Company may hold cash or low risk instruments such as government bonds or cash funds denominated in either VND or USD, either in Vietnam or outside Vietnam.

HISTORICAL FINANCIAL INFORMATION

^ The figures for 2019 above include adjustments to the share prices of some investments at 30 June 2019 in order to adjust for pricing anomalies identified by the Board. Please refer to the Annual Report and Financial Statements for the year ended 30 June 2019 for a complete explanation.

* Following the change of domicile to Guernsey in 2016, the Company's shares have been quoted in Pounds Sterling ("GBP"). USD NAV per share is translated to GBP using the rate of exchange at 30 June each year.

‡ Calculated as general and administration expenses divided by average NAV for the year. Ongoing charges have been prepared in accordance with the Association of Investment Companies ("AIC") recommended methodology.

₸ Calculated as total incentive fee divided by average NAV for the year. The calculation can be found in the glossary.

₹ Calculated as the sum of general and administration expenses and total incentive fee divided by average NAV for the year. The calculation can be found in the glossary.

FINANCIAL HIGHLIGHTS

In the year to 30 June 2022, the Company's NAV per share decreased in US Dollar terms by 10.5% to USD7.22, while the Company's share price decreased by 12.8% to USD5.79, from the same date a year previously. Taking account of dividends paid in the year to 30 June 2022, the NAV Total Return was -8.8%*.

* Expressed in percentage terms, is a measure of the investment return earned by the Company, calculated by taking the change in the NAV over the period in question and dividing by the starting NAV. This assumes that any dividends paid in the period are reinvested at the prevailing NAV per share on the ex-dividend date and that the dividend would grow at the same rate of return as the NAV per share after re-investment. A numerical reconciliation of the NAV Total Return can be found in the glossary. This footnote applies to all disclosures of NAV Total Return throughout this Annual Report and Financial Statements.

** Calculated as NAV per share less share price divided by NAV per share. The calculation can be found in the glossary.

CHAIRMAN'S STATEMENT

Dear Shareholder,

Investment Performance

Over the course of the year under review, the Company's Net Asset Value per share declined by 85.0 cents, or by 8.8% on a total return basis[1], taking account of the 16.0 cents per share dividends paid during the year. This result was driven by a sell-off in the Vietnamese market, which occurred mostly in the second quarter of 2022; prior to that at the end of February we recorded our highest-ever month-end NAV per share. For our UK-based investors, market movements were mitigated by the strength of the dollar and, in sterling terms, the share price total return over the year was a positive 1.1%.

[1] An Alternative Performance Measure: see Glossary for further details

As our Investment Manager notes, domestic Vietnamese investors have increased their investments in listed Vietnamese companies but, nevertheless, any stock exchange which is exposed to international investors is not immune from global market sentiment. In the year under review, that sentiment was driven by concerns over inflation driven initially by the effects of the COVID-19 pandemic and then by the supply shocks resulting from the Russian conflict with Ukraine. Against this difficult background, the Vietnamese economy continued to perform relatively well, and the fall in the market does not reflect the performance of the economy or, in many cases, of Vietnamese companies.

While it is disappointing to report any negative return for the year, our investment objective is to achieve medium to long-term returns and looking at the longer term the Investment Manager has performed well and, for example, the NAV total return1 in US dollar terms over three years and five years was a commendable 48.4% and 70.4%, respectively.

Dividends

On 25 October 2021, the Board declared a dividend of 8.0 US cents per share, which was paid to shareholders in early December 2021. This represented an increase of 33% over the dividend of 6.0 US cents per share which had been paid in May 2021. Although the NAV showed a modest increase over the first six months of the financial year, against a background of global uncertainties, the Board decided not to increase the dividend at the half year and declared a maintained dividend of 8.0 cents per share in March 2022 which was paid in May 2022.

The NAV did, indeed, decline over the second half of the financial year but on 24 October 2022, the Board declared a maintained dividend of 8.0 cents per share, representing a little more than 1% of the NAV per share as at the financial year-end. The Board recognises the importance of dividends to many shareholders and a dividend at this level is in line with our policy of paying two dividends per year, each at a rate of approximately 1% of NAV per share. The Board will next consider the dividend at the time it approves the interim accounts in March 2023, bearing in mind the NAV per share at that time.

Gearing

In March 2022, the Company entered into a USD40 million one year secured revolving credit facility with Standard Chartered Bank. Agreeing this facility represented an important milestone in the development of VOF as a company and having it available provides an additional source of short-term liquidity for the Investment Manager, particularly as it manages the Company's cash flows on both implementing and realising investments in private equity and other illiquid instruments.

Marketing and the Discount

The Board continues to focus on the balance of demand for, and supply of, the Company's shares, and we remain active in both promoting the Company and also in buying back shares when we believe that this is in the best interests of shareholders.

Our Investment Manager has continued to promote the Company via a number of channels, assisted by our brokers, Numis Securities Limited, and distribution partner, Frostrow Capital LLP and as restrictions on international travel eased in the first half of 2022, members of the VinaCapital team were able to travel to the UK, Europe, and the US for meetings with existing and potential shareholders.

The Company has recently announced the appointment of Barclays Bank Plc to provide investor engagement services to compliment those of Numis and Frostrow which should help further develop the Company's shareholder base.

We make a variety of information available with the aim of stimulating demand for the shares: a detailed fact sheet is issued each month and regular updates on the Vietnamese market and economy in both written and video form are posted to our website. I encourage you to sign up to be notified of new publications at https://vof.vinacapital.com if you have not already done so.

Over the year to 30 June 2022, 4.9 million shares were bought back, which was 2.9% of shares in issue at the start of the period. The discounts at which these shares were bought resulted in an increase in the NAV of some 4.2 US cents per share to the benefit of continuing shareholders and, the Directors believe, is helping to control the volatility of the discount.

Over the past few weeks, the discount has come under greater pressure, as have the discounts of most London-listed investment companies which invest in developing markets. Against a broader background of rising energy costs and inflation in developed economies, investors in emerging markets have been further concerned by geo-political events including the US sanctions on China, China's zero-COVID-19 policy and the Russian conflict with Ukraine. The Vietnamese economy is less affected by these events than some others but, nevertheless, demand for shares has been affected by a general flight to what are perceived by international investors to be safer havens. We will continue to promote the long-term potential of investment in Vietnam and the benefits of the Company's unique approach to investing and will continue to use the buyback where we feel it is in the best interests of the Company.

The Board

Steve Bates retired as a Non-Executive Director and Chairman of the Company at the Annual General Meeting on 2 December 2021, at which time I took over as Chairman and Julian Healy took my previous role as chair of the Board's Audit Committee. I would like to repeat the Board's thanks to Steve for his exemplary leadership, commitment and diligence over the nine years for which he was a director.

In anticipation of the retirement from the Board of Thuy Bich Dam, who was appointed as a Director in March 2014, a number of potential Vietnamese directors were interviewed when members of the Board were finally able to travel to Vietnam in March 2022. Following this process, Mr Hai Thanh Trinh was identified as the preferred candidate and was appointed as a non-executive Director and a member of the Board's committees with effect from 30 June 2022. Mr Trinh has over 30 years' business experience, having held various managerial and senior executive positions at financial services institutions in Vietnam and in the United States including An Binh Bank, Indochina Capital, New York Life and Bao Viet. He had recently retired as an Independent Director of Saigon Hanoi Commercial Bank. He also currently serves as Independent Director and Chairman of the Audit Committee for Van Phu Invest, a real estate developer in Vietnam which is listed on the Ho Chi Minh City Stock Exchange. Mr Trinh holds an MBA in Finance & Investment from the George Washington University and a bachelor's in commerce and economics from the National Economics University (Hanoi).

The Board is now formed of six directors, four men and two women, with two of the Directors being of Vietnamese nationality.

Investment Management Fees

Last year we reported very high investment returns, which resulted in the Company accruing a substantial incentive fee. The amount of incentive fees available to be paid out each year is capped at 1.5% of the average month-end assets for the year in question. We therefore paid out an amount limited by the cap last year and in the accounts for the year to 30 June 2021 carried forward an amount of USD58.3 million (discounted for the time value of money to USD48.8 million) for potential deferred payment for the 2022 and subsequent accounting years.

As described above, over the year under review, the NAV reduced. As a result, no further incentive fees were accrued and the amount accrued last year for potential payment was reduced by USD15.2 million via a clawback, which was written back into the NAV. This has resulted in a carried forward accrual of USD43.1 million. The incentive fee cap again took effect this year and USD20.3 million of deferred incentive fees will be paid out on publication of this annual report, leaving a balance of USD22.8 million (discounted for the time value of money to USD20.4 million) for potential payment in future years. Note that the amount to be paid out this year does not affect the Company's current ongoing charges ratio; indeed, the reduction in the accrual through the clawback mechanism had the effect of reducing the Company's reported running costs for the year under review.

Annual General Meeting

This year's AGM is due to take place at 11:00 on Monday, 5 December 2022 at the Company's registered office, Trafalgar Court, Les Banques, St Peter Port, Guernsey, GY1 3PP.

Shareholder engagement remains very important to the Directors. Whether or not you intend to come to the AGM, shareholders are asked to participate in the AGM by appointing a proxy to vote on the resolutions set out in the notice of AGM as soon as possible.

Outlook

The outlook for the global economy remains uncertain. Russia's conflict with Ukraine and other geo-political issues, coupled with the continuing effects of the COVID-19 pandemic have led to levels of inflation in parts of the developed world not seen in over a generation. This has led to central banks and governments being faced with the dilemma of attempting to defuse a potential inflationary spiral by raising interest rates while seeking to minimise the risk of a prolonged recession. In the short term, volatility in equity markets driven by investor sentiment is perhaps inevitable.

Against this background, the Investment Manager's report sets out in some detail the factors behind the continuing resilient performance of the Vietnamese economy and the reasons why this is expected to continue for the foreseeable future. Your Board believes that VinaCapital's approach to investment with its emphasis on growing investors' capital with strong risk mitigation will continue to deliver attractive returns over the long term.

On behalf of the Board I thank you for your continued support.

Huw Evans

Chairman

24 October 2022

INVESTMENT MANAGER'S REPORT

Macroeconomic Highlights

While we are aware of the risks posed by the challenges facing the global economy, we remain of the view that Vietnam's economy can grow at a stable rate of 6% to 7% over the next five years

While Vietnam was one of the few economies in the region to deliver positive GDP growth in both 2020 and 2021, this growth was restrained by the COVID-19 pandemic. In the first half of 2022, Vietnam showed clear signs that growth is now returning to levels seen prior to the pandemic. Most economists project Vietnam's GDP growth in 2022 to be one of the strongest in the region, with the World Bank recently raising their GDP growth forecast for Vietnam to 7.5% this year. The surge in GDP growth as VOF's financial year progressed culminated with 7.7% annualised GDP growth in the 2Q22. This was driven by a dramatic rebound in domestic demand as the economy reopened and by factory workers in Vietnam returning to their jobs on the assembly line.

Compared to the alarming global inflationary pressures, Vietnam has experienced relatively tame inflation averaging 2.4% in the first half of 2022, but with a likelihood of it increasing by the end of 2022, though well below the central bank's average inflation target of 4% for 2022. Vietnam did not exacerbate the inflationary pressures spawned by sharp increases in global commodity prices with excessive fiscal stimulus, unlike many other countries around the world.

The sanctions applied to Russia as measures against the conflict in Ukraine will undoubtedly contribute to inflationary pressures, as commodity prices rise. Fortunately, Vietnam's direct trade and investment ties with Russia are very small (at less than 1% of GDP), and the country is not adversely impacted directly by the conflict. Vietnam has been fortunate to be a substantial agricultural producer and exporter and to have a reasonably small component of energy in its Consumer Price Inflation basket. The fact that Vietnam is a net exporter of food helped limit the country's food price inflation to just 2.3% y-o-y at the end of June 2022. This in-turn helped limit the increase in Vietnam's headline CPI rate, since food accounts for 36% of Vietnam's CPI basket. Furthermore, one of the largest importers of Vietnam's agricultural products is China and amidst China's zero-COVID-19 strategy, inflationary pressure from rising prices of agricultural and aquaculture products has been muted. Clearly, inflation is a risk on which Vietnam needs to keep a close eye as China re-opens its economy.

While consumers in Vietnam are certainly impacted by higher global commodity prices (we estimate that crude oil/petrol accounts for about 6% of the CPI basket), they are not suffering from additional domestic price pressures because of the relative stability of the VND. Confidence in the VND is also supported by the relatively low level of government debt.

To fight the alarming levels of inflation, the US and European governments are increasing interest rates and practicing tighter monetary policy. Given the aggressive nature of the rate hikes in the US, the USD has strengthened significantly against global currencies. Since Vietnam effectively applies a "soft peg" against the USD, the local currency has shown only a very small depreciation, while many currencies within the region have devalued significantly more, implying that the VND has in fact appreciated against these other currencies. The implication of rising interest rates, a stronger USD (and VND), and tightening liquidity around the world has had little impact on Vietnam's economy over the 12 months to 30 June 2022.

Vietnam does benefit from unique tailwinds that will continue to propel its economy forward and, if managed properly, maintain its steady rate of growth in the coming years. The continuing recovery of all industrial activities is supported by increasing FDI. One of the most important drivers of Vietnam's economic growth - which is likely to remain the country's most important in the medium term - is the FDI-funded build out of the country's industrial base. This is one critical factor that is helping fuel the rise of Vietnam's emerging middle class by offering attractive employment opportunities to the country's workforce.

Prior to the pandemic, Vietnam emerged as a key country to which multinational companies diversified their manufacturing activities away from China.

Vietnam is clearly benefiting from the nascent "friend-shoring" phenomenon, in which multinational companies are increasingly sourcing products from countries that are designated as "friendly" by the US government. US policy makers have made it clear that the US wants to have very friendly economic relations with Vietnam, and this is one reason why an increasing number of companies are diversifying and relocating some of their production facilities from China to Vietnam - although China's commitment to its "zero-COVID-19" policy has also contributed to this trend. There is clear evidence that some companies are relocating production facilities from China to Vietnam.

Furthermore, a strong recovery of the service sector after the relaxation of all COVID-19 related restrictions in Vietnam, coupled with a moderate USD15 billion fiscal package, including USD2 billion of interest rate subsidies, will support the economic recovery.

There are signs that demand for "Made in Vietnam" products is slowing as economic growth in the US slows, and therefore our optimistic GDP forecast for 2022 is not predicated on the continued strong performance of Vietnam's manufacturing sector (which accounts for just over 20% of the country's economy), but is instead supported by strong consumption growth, given that consumption accounts for about two-thirds of Vietnam's GDP. Vietnam's retail sales, which are a close proxy to domestic consumption, accelerated continuously in the first half of 2022 from just 1.7% y-o-y growth in February 2022 all the way up to 27% y-o-y growth in June 2022.

The financial year started in Vietnam with the highest levels of movement restrictions and social distancing to combat COVID-19 since the start of the pandemic. Most businesses found themselves closed for three to four months from May 2021 and it was not until September 2021 that the Government became more comfortable with allowing the economy to re-open. This was only possible thanks to the successful and aggressive roll-out of the vaccination program using vaccines from Europe, the United Kingdom, and the United States, which allowed Vietnam to embrace the idea of "living with COVID-19".

We were fortunate to have observed the way that markets reacted, and businesses dealt with movement restrictions in developed markets such as the US and Europe in 2020 and it was apparent that Vietnam would face significant market volatility and cash flow challenges as economic activity ground to a halt. In the light of these challenges, our investment strategy in the face of the protracted health pandemic, which commenced in the spring of 2020 and lasted to the end of 2021, was to monitor yet more actively and diligently our investments and help portfolio companies preserve cash.

While there were plenty of investment opportunities that came to our attention during this period, unfortunately many of these businesses were: (1) in distress; (2) unable to provide meaningful business projections for the years to come; and (3) failed to convince us of their ability to navigate the storm. However, as Vietnam began to learn to live with COVID-19 and greenshoots of economic activity started to appear in the latter part of 2021, we began to discuss terms of investment for opportunities that we had been closely monitoring during the earlier part of the year.

We continue to hold the view that market and economic volatility will remain with us for at least two to three years not only as a result of the recovery from the COVID-19 pandemic, but also from global economic sanctions imposed on Russia and from anti-inflationary policies.

Stock Market Performance

When Vietnam faced its hardest days fighting COVID-19 through severe movement restrictions from July to September 2021, perversely the stock market did very well; although foreign investors were net sellers of the Vietnamese market, domestic investors increased their levels of participation significantly and this sufficiently overcame foreign selling pressure. From July to December 2021, over 900,000 newly opened stock trading accounts from domestic retail investors helped push the ADTV up substantially to an average of USD1.4 billion per day by the end of 2021. To put this into perspective, during the first quarter of the calendar year 2020, the ADTV was just USD165 million.

However, the global risk-off sentiment that took hold during the first two quarters of 2022 was further exacerbated in Vietnam by domestic issues. When global inflation became less "transitory" and more of a headache in the early part of 2022 and central banks around the world started to increase interest rates, the Vietnamese market did not avoid the collateral damage. Coupled with a campaign to clamp down on the illegal use of funds from bond issuances and stock manipulation by a few local companies, the Vietnamese stock market as measured by the VN Index declined significantly and more so than other regional markets.

The VN Index's sharp 19.7% q-o-q drop in 2Q22 (in local terms) was the second sharpest pullback behind the COVID-19-affected quarter of 1Q20 (at -31.1% q-o-q).

This negative sentiment is reflected in the market liquidity which was sharply lower at USD750 million per day in 2Q22, down by almost 30% quarter-on-quarter, as domestic retail investors, who had been the driving force of market liquidity (and performance) over the previous two years, chose to sit on the side-lines and were net sellers to the tune of USD280 million in the second quarter of 2022 versus USD540 million net buying in the first quarter of 2022. The sharp correction in the market also triggered margin calls that forced the selling of stocks during this period, adding to the market volatility.

During 2Q22, margin loans declined 21% after a relatively flat 1Q22. Since the end of the financial year, we have observed brokers going to market to raise additional capital in order to increase their margin book, implying that brokers' capacity and willingness to extend margin to their customers is improving. We could expect to see a sharp increase in margin loans in the latter half of 2022 given the significant contraction in 2Q22. What is important to note is that margin loans as a percentage of both market capitalisation (2.9% at 30 June 2022) and free float (7.3%) remains at conservative levels and therefore, any contribution to market volatility is limited.

Against this background, foreign investors have been net buyers in the second quarter of 2022 for the first time since 2019, attracted by the reasonable valuations that the market now offers and have been allocating mostly to banking stocks. The return of positive local sentiment should lead to higher ADTV which would be supportive of the market.

Vietnam remains attractively valued. On prospective FY2022 earnings, PER and EV/EBITDA are well below their 5-year averages.

Valuations remain appealing

Although there are mounting economic concerns plaguing global markets, our research team believes that the macroeconomic picture for Vietnam remains remarkably strong and resilient. The second quarter 2022 GDP growth of 7.7% y-o-y is the best GDP quarterly growth rate in over a decade and may pave the way for upgrades to earnings estimates. In our view, the equity market appears to be overly cautious on the downside risk to earnings considering the country's strong growth prospects.

Based on our research team's coverage universe, we are forecasting 30.8% and 27.5% earnings growth for financial year 2022 and financial year 2023, respectively, led by the oil and gas sector, followed by industrial parks, real estate, ports and logistics and banks.

Sector Outlook

Table: VN Index sector weight, performance, and weighted contribution to performance (%) for FY2022 is based on GICS sector classification.

Source: Bloomberg, VinaCapital Research

The VN Index declined by 14.9% over the period of review, with the Financials, Real Estate and Materials sectors, which make up 64.3% of overall market capitalisation, the largest detractors to market performance.

● Financials, which is the largest sector in the VN Index at a 34.1% index weight, saw a decline of 24.4% during the financial year, making it the largest contributor to the market decline.

● Real Estate, which is the second largest sector in the index at 22.6%, posted a decline of 21.1% over the period and was the second largest contributor to underperformance.

● Materials, while only making up 7.6% of the index weight, is dominated by Hoa Phat Group (HOSE: HPG), and the sector declined by 27.0% during the period, with HPG alone experiencing a 42.8% decline in share price (local terms).

On the other hand, the Utilities, Consumer Discretionary, and Information Technology sectors were the best performing sectors over the period under review, but given their smaller market weights that total 12.8%, did not provide much in terms of support to the overall market performance, but nevertheless saved it from what could have been a larger decline.

However, the longer-term performance of these sectors will benefit from the economic recovery that is already underway in Vietnam and much of the recent sector underperformance has been due to localised factors that eroded investor confidence. In addition to the sell-off in global markets in recent months, the VN Index's sharp retreat began in April 2022 following the announcement of investigations over regulatory irregularities by companies in the real estate sector and a lack of oversight by key officials in the stock market that was further exacerbated by the unwinding of margin positions. None of VOF's portfolio investments have been caught up in any of these regulatory investigations. Nevertheless, all this together soured domestic investor sentiment and reduced trading liquidity. Still, by June 2022, many of these domestic issues seemed to have settled and there is confidence in the market that there will be fewer "surprises" from these investigations.

The country's long-term growth drivers have remained intact in spite of COVID-19, so we also continue to focus on companies in sectors that are beneficiaries of FDI inflows, infrastructure development, and consumer spending themes, particularly those that play into this recovery theme such as aviation and logistics.

We feel strongly that the aviation sector will recover rapidly, as domestic and international travellers take to the air. Over the first six months of 2022, the CAAV, in collaboration with data from Airbus and the IATA, reported that Vietnam's domestic aviation market had the fastest recovery rate in the world, with growth of 123% compared to the same period in 2019 (pre-pandemic). The total number of passengers travelling through airports reached 40.7 million, up 55.8% from the same period in 2021, in which domestic passengers reached 38.9 million (+52.6% year-on-year), international passengers reached 1.8 million (+904.6% y-o-y), and the CAAV forecasts that airports across the country would welcome 87.8 million passengers, an increase of 190% compared to 2021.

Naturally, companies in the aviation sector are able to capitalise not only on travel recovering, but also on the growing demand for logistics and in the delivery space as well as the resale of aircrafts purchased with bulk discounts.

The consumer sector has demonstrated strong growth over the last 15 to 20 years and continues to offer strong potential in the years to come. Vietnamese consumers are getting wealthier and the consumer sector stands to gain significantly. However, as discussed in past Investment Manager's reports, this sector's business model is changing fast due to the rapid adoption of technology throughout the broader population, and the shifting of much of the value proposition to consumers. Our objective is to identify where the weaknesses and opportunities lie and invest appropriately, mindful of the long-term impacts of digitalisation, competition, and evolving consumer behaviours.

Banks, a key component of the financial sector and a key contributor to broad economic growth in Vietnam touching all economic sectors, stand to gain in a rising interest rate environment and as the economy recovers. However, non-performing loans from 2020 and 2021 that were allowed to be restructured in accordance with the State Bank of Vietnam's directives will have to be resolved in the years to come. Further contributing to this systemic risk is the possibility of a recession in the US and Europe leading to weakened cash flow for export driven businesses. Given that the real estate sector remains the largest sector allocation in our portfolio, we will continue to monitor the real estate development business as cash flow and loan servicing may weaken as interest rates rise.

ESG and Voting Principles

We discuss further in this report, our approach to ESG matters, in terms of due diligence, review and monitoring activities. Furthermore, we highlight below examples of ESG initiatives we have implemented across several of our investments.

In previous Investment Manager reports, we have included a discussion of our Responsible Investment approach and principles. This year, we have migrated this section to the Corporate Governance Statement of the Annual Report where a more complete picture of both the Board and Investment Manager's commitments to ESG are discussed. Instead, we discuss here some recent activities that we have conducted with several of our portfolio companies, as well as a discussion on our Voting Policy.

It is helpful to reiterate VinaCapital's commitment to adopting and implementing the United Nations-supported PRI, which VinaCapital believes is in the best long-term interests of its investors and portfolio companies, and which contributes to a more long-term oriented, transparent, sustainable, and well-governed investment market. That said, we take a pragmatic approach to adopting ESG in our investment activities, while realising the limitations of investing in developing markets. We therefore focus less on screening companies solely on ESG issues, and more on stewardship activities where we believe a patient timeframe and active engagement can improve outcomes. This is further reflected in our approach to voting and ensuring that we actively participate in voting across our portfolio companies.

For publicly listed companies, VinaCapital has implemented a rigorous framework to assess ESG risks and encourage companies to improve their practices when warranted. Our portfolio managers, and in-house ESG and research teams regularly engage with management on ESG policies and practices. The discussions around ESG revolve around our proprietary framework of over 200 questions, that cover 17 areas of focus, that touches on management and corporate structure; business ethics; energy, water, pollution, waste management, and Greenhouse Gas emissions; biodiversity; employee related issues such as wages, health, employment conditions; and community impacts.

Currently our research team has made over 80 assessments of publicly listed companies, including the majority of those held in the VOF public equity portfolio. We highlight below an example of our active engagement with Hoa Phat Group, one of the top portfolio holdings.

Hoa Phat Group ("HPG") - Active ESG Engagement with Management

Hoa Phat Group (HOSE: HPG) is the leading industrial manufacturing group in Vietnam with a 33% market share in domestic construction steel in 2021 and employs over 20,000 employees. Originating as a construction machine and equipment trading company in August 1992, HPG has gradually expanded its business to trading and production of steel (80-90% of its profit) and other industrial production like furniture, refrigeration, real estate, and agriculture. HPG was listed on HOSE in late 2007 during which time VOF invested as part of a private equity opportunity. Today, HPG remains a top five holding in the portfolio, and the long-term story for HPG remains intact, with no domestic or foreign steel producer able to match HPG's formidable competitive advantages or outsized market share.

As part of our ongoing assessment of HPG against our ESG framework, during HPG's 2022 Annual General Meeting, we raised to the attention of the Chairman and Board of Directors the growing importance of ESG matters for global, institutional investors. We conveyed to management that given HPG's plans to grow and supply global markets, better management of ESG issues would be increasingly important.

Furthermore, we formally wrote to HPG, emphasising the importance of ESG and proposed some recommendations for the company to consider, including:

● Establish an ESG policy covering all business activities across the group.

● Appoint a senior ESG manager at the group level to oversee the implementation of ESG-related policies and practices, and to communicate them to investors.

● Undertake an ESG audit to assess the status of ESG matters in their organisation, identify key ESG risks, and create a plan to manage those risks.

● Better communicate their ESG initiatives and plans to investors.

We will continue to monitor HPG's efforts in improving their ESG profile and remain engaged in helping them gradually improve.

Ngoc Nghia Industry Service Trading ("NNG") - ESG Engagement within Private Equity

Turning to our private equity portfolio, this is where we believe we can exert the most influence and measurable impact in making ESG improvements to our portfolio companies. Specifically, ESG forms a core part of the due diligence and investment activities that VOF carries out when investing. Through our private equity approach to investing, we have an opportunity to carry out ESG due diligence by engaging external consultants, and now we can rely on our in-house ESG expertise with the recent appointment of an ESG Manager who reports to our Group COO. ESG considerations also form part of the key risks that VinaCapital's Risk Management Committee evaluates our investment opportunities against.

An example of this active engagement in ESG that we held in our private equity portfolio was Ngoc Nghia Industry Services Trading (UPCoM: NNG). In late 2019, just prior to the onslaught of the pandemic, we invested a significant minority stake in a leading plastic packaging production firm in Vietnam. The firm has the largest plastic packaging production capacity in Vietnam, with an annual output of 3.7 billion preforms, bottles and closures at three production sites. Based in Ho Chi Minh City, the company's core business is manufacturing PET packaging, a recyclable, lightweight, resealable, and shatter-resistant plastic used by many manufacturers of food and beverage as well as home and personal care products. Founded in 1993, the firm has been supplying its products to a range of leading international and domestic clients like Unilever, Coca-Cola, Suntory PepsiCo and Vinamilk.

Since our investment, we have helped to put in place improvements to the company's corporate governance, to restructure its capital structure, and to enhance their process of capital expenditure and working capital management. As a result, NNG's net debt reduced significantly by around 30% compared to when we made the investment. We also helped bring in professional managers to support the company and helped reduce

the family holdings in the company over the course of the investment, ultimately leading to an exit of both VOF and the founding family in early 2022 through a public tender offer to one of Thailand's leading chemical producers, Indorama Ventures. As part of our investment, we were granted two board seats, in addition to a seat with the company's board of supervisors.

In terms of environmental impacts, the company had already implemented a long-standing and effective programme of recycling and using recycled materials in their production. Aside from ensuring that we had a good programme of monitoring and maintaining manufacturing equipment, we were able to help bring improvements in their energy consumption and increase the amount of renewable energy used by the business.

We are encouraged that over the two- and half-year period of investment, NNG has made several improvements, including implementing new and more energy efficient machinery and equipment, as well as welcoming improvements in corporate governance, which have all proved to be invaluable to the new owners of NNG.

Voting Activities

As stewards of our investors' capital, we systematically engage with our investee companies on ESG matters. Our engagement takes various forms including voting, direct discussions with management, and educational initiatives, among others.

As part of VinaCapital's Voting Policy that applies to the funds that VinaCapital manages, a core principle is that we seek to actively participate and vote, directly or through voting, on all resolutions. We will generally exercise the voting rights for resolutions associated to the following matters:

● Corporate governance issues, including changes in the statutes of incorporation (such as amendments to the memorandum and/or articles of association), takeover, merger or disposal, acquisition and other corporate restructuring, and anti-takeover provisions;

● Changes to capital structure, including increases and decreases of capital and preferred stock issuances, approval of rights, bonus issue and warrants, and special dividend distributions (dividends in specie);

● Amendments to stock option schemes and other management compensation issues;

● Environmental, Social and Corporate responsibility issues; and

● Any other issue that may significantly affect the Fund's interests.

During the year, all 31 investments held in the VOF portfolio held their AGM. This included public and private companies, where we voted on all resolutions raised by companies held in our private equity portfolio. Of the 212 resolutions that we voted on, we abstained or voted against 3 of these resolutions, while we support the remaining 209 resolutions.

The largest category of resolutions that we voted on concerned ESG. This category predominately captures resolutions that relate to the "Governance" element of ESG, including for example: the appointment and removal of board members, and members of the supervisory committee; appointment of external auditors; or amendments to the company charter and internal policies. There were very few resolutions tabled by the portfolio companies that relate to Environmental or Social matters, perhaps a reflection of the stage of maturity of this developing market in addressing these concerns.

VOF Performance

We look to deliver stable, long-term performance for our investors

Over the long term, we expect the economic performance of Vietnam to drive investment returns and our approach to managing the Company's portfolio seeks to take advantage of this economic growth. It is, however, true that world events and cash flows into or out of the market can affect share prices in the shorter term - as we have seen in the year under review.

It is disappointing to report a fall in NAV over the year under review. In the light of economic and market volatilities over the last three years, it may be more relevant to view performance over the longer term. During the last three years, on a total return basis2 VOF's NAV increased by 48.4%, and over the past five years, NAV increased by 70.4%.

2 An Alternative Performance Measure: see Glossary for further details

VOF's performance over the past financial year has been affected by weak domestic and global markets. During FY2022, VOF's NAV declined by 8.8%3 (USD total return basis, $TR) while VOF's share price declined by 12.8% in USD terms (but increased by 1.1% in GBP" terms). During the first half of FY2022, from July 1st to December 31st, 2021, VOF's NAV enjoyed an increase of 6.9% while in the second half, from January to June 2022, VOF's NAV declined by 14.6% as a combination of global and domestic factors eroded investor confidence and impacted the domestic stock market performance.

3 An Alternative Performance Measure: see Glossary for further details

Given that VOF's investment strategy includes a significant element of private equity and privately negotiated investments, it is nevertheless worthwhile to note the volatile nature of the market as measured by the VN Index. During FY2022, the VN Index declined by 14.9% ($TR) and the decline was primarily during the second half of the financial year, from January to June 2022, when the VN Index entered bear-market territory and declined by 21.2% ($TR).

Table: VOF, VN Index and MSCI Emerging Markets performance, up to 30 June 2022.

Source: Bloomberg, VinaCapital.

Dividends

During the financial year, VOF received USD15.9 million in dividends from its portfolio companies and, in return, VOF continues to maintain its dividend policy and reward its shareholders with regular dividend pay-outs equivalent to approximately 1% of NAV every half year amounting to USD26.4 million for the financial year. VOF continues to be the only Vietnam dedicated closed-ended fund to pay a regular dividend. In addition to dividends, VOF is also engaged in a continuing share buyback programme. In FY2022, VOF bought back USD32 million worth of shares, and since the commencement of the buyback program in 2011, VOF has bought (and cancelled) a cumulative total of 161 million shares, equivalent to approximately USD440 million that has been spent on the share buyback programme since its introduction.

Investment Review

The current risks, uncertainties, and volatilities of the world has meant the terms of our investments are as important as ever. Therefore, we seek in our private equity and privately negotiated investments: (1) downside protections; (2) a clear and committed path to exit; and (3) regular ESG reviews.

These elements which we seek to embed in our terms of investment allow us to construct a portfolio that has exposure to high quality companies, on which we have performed extensive due diligence, while being able to de-risk much of the inherent volatilities that may come with investing directly into the stock market at the current time.

Over the next twelve to twenty-four months, we will continue with this cautious approach to investing, and pursue investments where we have the right to carry out due diligence not only on financial and legal aspects, but also to identify any potential ESG weaknesses. We will identify businesses that have a clearly articulated path of recovery but may need support with their balance sheets to help their path to growth.

Our cautious and disciplined approach to sourcing investments has meant that we have forgone certain opportunities which were seemingly attractive and avoided other potential problems which have arisen in this market.

VOF Portfolio Review

Top Portfolio Holdings

Table: Top 10 Public Equity Investments as of 30 June 2022. 1 Includes Listed and Unlisted investments. Unlisted investments are those that are listed on UPCoM or trade OTC, and are not yet listed on either of the two main stock exchanges in Vietnam (HOSE and HNX).

Source: VinaCapital.

Table: Top 10 Private Equity and Public Equity with Private Terms Investments as of 30 June 2022. (1) An Cuong Wood Working (ACG) was initially entered into as a private equity investment in 2016. Since August 2021, when ACG was listed on UPCoM, the investment has been marked-to-market in the daily NAV. In October 2022, the company's listing migrated to HOSE. The investment is still managed as a private equity investment, given that there remain certain privately negotiated terms. Nevertheless, this investment is recorded as a public equity investment in Notes 4, 8 and 20 of the Financial Statements.

Source: VinaCapital.

To better reflect VOF's investment strategy and highlight the negotiated terms of investments for several of our investments in the portfolio, as of March 2022 we have reclassified the portfolio by asset class into the following "buckets" to help investors better understand the nature of our investments and terms. This is reflected in our regular monthly investor newsletter where we provide an explanation of this reclassification:

● Listed Equities: Investments that are held in the portfolio which do not have privately negotiated terms, or where these privately negotiated terms of investment have expired, aside from what is permitted under the relevant Securities Law.

· Unlisted Equities: Publicly traded securities that are listed on either the UPCoM exchange of the HNX, or are traded OTC and are generally illiquid in nature. These investments may be entered through a privately negotiated process or privatisation of a state-owned entity, but no longer have privately negotiated terms, or these privately negotiated terms of investment have expired, aside from what is permitted under the relevant Securities Law.

● Public Equity with Private Terms: Investments in generally unlisted instruments issued by publicly listed companies which have unique terms, such as downside protections and profit commitments, that are not available to general market participants. Where these terms have expired or are no longer relevant, these investments will be reclassified to either Listed Equities or Unlisted Equities.

● Private Equity: Illiquid investments in private companies with specific terms of investment including downside protections and profit commitments, as well as Operating Assets that generate an ongoing yield.

Portfolio Review by Sector and Selected Companies

Looking back over the last year as Vietnam learned to live with COVID-19, we found ourselves spending more time with a few businesses that were severely affected by the movement restrictions imposed during the year.

Healthcare Sector - Thai Hoa International Hospital

All three of VOF's hospital platforms faced severe cash flow challenges during most of 2021 as the pandemic hit and patients were reluctant to visit hospitals out of fear that they may contract COVID-19 or other illnesses. Furthermore, local governments were encouraging all private hospitals to turn their focus to treating COVID-19 patients, thus reducing capacity to treat only severe cases of other illnesses. Patient care related to COVID-19 generated very little revenue and, in some cases, drove hospital costs up significantly because extra precautions were required such as the wearing of personal protective equipment.

Towards the end of 2021 when Vietnam started to loosen movement restrictions, two of our hospital platforms, namely Thu Cuc International Hospital and Tam Tri Medical rapidly recovered, particularly their facilities in the major cities. However, provincial hospitals continued to suffer mainly because patient income and job recovery were not as pronounced as in and around the major cities. As of 30 June 2022, we are focusing on helping some of these hospitals in provincial cities improve their operational performance, particularly the Thai Hoa International Hospital in the Dong Thap province in the Mekong Delta. Thai Hoa International Hospital is currently carried at USD9.9 million in NAV and represents 0.8% of VOF's NAV.

Construction Sector - Coteccon Construction ("CTD")

VOF has one listed construction company in its portfolio, Coteccon Construction (HOSE: CTD) recorded at USD11.7 million in NAV or 1.0% of VOF's NAV. This company faced significant hardship during 2021 and well into 2022. Over the last few years, there has been a major change at the Board and management levels. The new team has not been able to navigate effectively the challenges resulting from COVID-19. As the economy recovers, it finds itself struggling against higher material and labour costs. Given we are minority shareholders with few rights, we are unable to effect changes in management that we feel are necessary. It is encouraging to see that the majority shareholders do support the new management team and patiently await the fruits of their changes. Our lesson here is that we must continue to seek minority protections and veto rights, downside protections and/or performance commitments for all of our investments. 

These two examples, representing about 1.8% of NAV, are some of the challenging cases in our portfolio. The investment team, working with our Business Enhancement Team, are helping these businesses in their recovery efforts and we hope over the next year to have some form of resolution.

Financial Services Sector - Asia Commercial Bank ("ACB")

In early March 2022, we announced an additional investment in Asia Commercial Bank (HOSE: ACB, 11.6% NAV). ACB is now the largest position in the fund and reflects our intent to increase our exposure to the financial sector, while, at the same time, gradually reducing our overweight exposure to Materials and specifically Hoa Phat Group (HOSE: HPG, 9.3% NAV).

Founded in 1993, ACB is one of Vietnam's leading private banks, with a strong focus on consumer lending to the retail and SME segments. The bank recently reported that it attracted 800,000 new active customers in Q4 2021, increasing customer deposit growth. Furthermore, the bank is embarking on an intensive expansion into digitalization, new strategic client segments, and extending its network in cities in northern Vietnam. ACB ranks among the top 10 banks in Vietnam in terms of loans and total assets. It has superior asset quality as evidenced by having the second lowest non-performing loans ratio amongst peers, and a high reserve cover.

The bank is attractively valued: it trades on a P/E ratio of 6.1x; on a forward price-to-book ratio (P/B) of 1.4x and on estimated 2022 ROE of 27.0%. This compares favourably to the banking sector that trades on a P/E of 10.1x; a forward P/B ratio of 1.8x; and on estimated 2022 ROE of 19.8%, according to Bloomberg and VinaCapital Research.

Financial Services Sector - Asia Commercial Bank ("ACB") (continued)

Furthermore, we reviewed the potential impact that higher inflation and rising interest rates will have on the banking sector and conclude that our consolidation of investments into higher quality banks such as ACB stands to benefit from their being able to increase their net interest income and earnings in a rising rate environment.

Construction Materials Sector - Hoa Phat Group ("HPG")

Materials, specifically steel companies like Hoa Phat (HOSE: HPG, 9.3% NAV), did well during 2021. HPG enjoyed a record profit after tax of USD1.5 billion in 2021, making it one of the first non-banks ever to do so. However, into 2022, its share price declined and measured over the financial year, had declined by 42.8% due to: (1) weak demand and general market decline; and (2) HPG is operating at near-full capacity. The Materials sector overall has been one of the worst performing sectors between January to June 2022, impacted by reduced selling prices and higher input costs. However, we feel that China and Vietnam will start to spend heavily on infrastructure to stimulate their economies and the average sales price for steel will climb and margins will improve. Further, as HPG is currently investing in phase 3 of its expansion strategy, new capacity and a renewed opportunity for growth will commence towards the end of 2024.

During the first half of the financial year, primarily during the July to December 2021 period, and prior to the sharp correction in the share price during the second half of the financial year, we continued to trim down our position in HPG to return approximately USD68 million in proceeds to the Company which we earmarked for investments into new opportunities such as ACB mentioned above. Nevertheless, HPG remains a top 5 holding in the portfolio, and the long-term story for HPG remains intact, with no domestic or foreign steel producer able to match HPG's formidable competitive advantages or outsized market share.

Industrial (Aviation) Sector - Airports Corporation of Vietnam ("ACV")

As mentioned earlier, by 2Q22, domestic passenger volumes surpassed pre-pandemic levels. As such, the recovery in the aviation sector so far in 2022 has seen Airports Corporation of Vietnam (UPCoM: ACV), one of our top 5 holdings (6.3% NAV) post a turnaround and significant improvement in performance. The share price has outperformed the VN Index over the 1H22, posting a decline of -9.2% versus -21.2% for the VN Index. 2H22 should see an increase in international passenger volumes, particularly with the reopening prospect of China, South Korea, Taiwan, and Hong Kong. International passenger volumes are important for ACV as domestic passenger fees are much lower than international passenger fees. A further catalyst for ACV is the expansion and completion of Terminal 3 in Tan Son Nhat International Airport in Ho Chi Minh City as it will help expand capacity at the country's busiest airport. In addition, with borrowings in JPY, a further weakening of the JPY could contribute to unrealized FX gains for ACV. Our Research team expects ACV to deliver net profit growth for 2022E of USD235 million (+564% y-o-y) and 2023E of USD350 million (+48% y-o-y), returning to pre-COVID-19 levels.

Real Estate Sector - Hung Thinh Land ("HTL")

The largest sector allocation in the portfolio is Real Estate at 27.1% of NAV. We have written extensively in recent months to our investors of the difficulties that the sector had to face in the light of the government's efforts to clamp down on stock market manipulation within the small-cap real estate companies and the scrutiny concerning the use of proceeds from the raising of corporate bonds. This has had an impact on the sector's performance over 2H22, with the sector declining 23.5% during the January to June 2022 period.

Nevertheless, we are long term investors and fundamentally believe that the sector still offers attractive investment opportunities and can deliver strong returns over the long term. As such, we continue to seek opportunities and in May 2022 the fund completed its investment in Hung Thinh Land Joint Stock Company (Pre-IPO: HTL, 2.2% NAV), one of the largest privately held property developers in Vietnam. VOF invested USD25 million to obtain an undisclosed minority stake in the property developer. Established in 2002, HTL has 20 years' experience in the Real Estate sector, and the team at HTL has benefited from many years of experience from Hung Thinh Group Corporation developing multiple real estate projects across Vietnam. Today, HTL is developing 49 residential and hospitality real estate projects with a large land bank of approximately 2,000 hectares in various prime locations, including Ho Chi Minh City and other major provinces such as Dong Nai, Binh Duong, Vung Tau, Khanh Hoa, and Binh Dinh.

HTL has a clear plan for IPO and listing its shares on the HOSE in 2023. Post-listing, HTL is expected to become the third largest real estate developer on HOSE, following Vinhomes (HOSE: VHM) and Novaland (HOSE: NVL), and could be added into the VN30 index basket. This investment supports our strategy of having a diversified portfolio in public and private equities in the medium to long term, by seeking opportunities that are not readily available to the market.

Real Estate Sector - Khang Dien House ("KDH")

Khang Dien House (HOSE: KDH, NAV 10.7%) remains one of the top holdings in the portfolio. KDH is one of the leading landed property developers in Vietnam, focusing on townhouses and villas. Since 2017, the company has also expanded into mid-range condominium developments. The company's market cap is USD1.1 billion and it possesses an undervalued land bank that is one of the largest in HCMC. It has a long pipeline of developments, with their current land bank in excess of 600 hectares in HCMC representing at least 10 years of development. Among listed peers, only Vingroup and Novaland have larger land banks in Ho Chi Minh City.

KDH's 2Q22 profit surged 25% y-o-y to USD14.5 million. Our Research team maintains their presales forecast for 2022 of USD227 million from the launch of two projects in 2H22 (one condominium project, and one landed property project). KDH benefits from strong urbanisation trends and favourable demographics amongst its buyers, coupled with a low future supply of products. Its projects are the least speculative among peers due to the high demand for condominiums and landed property within HCMC and the company's fast payment schedule that they can demand is less attractive to speculative buyers.

Materials Sector - An Cuong Woodworking ("ACG")

Another key portfolio company that is a major beneficiary of the recovery in the Real Estate sector is An Cuong Woodworking (UPCoM: ACG, NAV 3.9%). The company recently announced strong revenue and profit guidance for the year, with revenues of USD184 million (+29% y-o-y), and NPAT of USD24 million (+22% y-o-y), while the 1H22 revenue and NPAT increased 12% and 17% y-o-y, reaching 45.1% and 50.7% of the full year targets, respectively. Profit margins remain strong despite rallying input prices thanks to their strong selling price bargaining power and productivity improvements. Furthermore, the company moved its listing to HOSE in October 2022.

Overall, ACG attributes its performance to economies of scale, expanding market share as customer demand is recovering across most segments, while softer COVID-19 disruptions on home furnishing and construction activities in both domestic and export markets are reflected in strong 1H22 sales growth. ACG plans to grow its exports revenue by 70% in the medium term, as well as improve export profit margins which are currently lower than that of the domestic business. Furthermore, ACG continues to expand its customer base and distribution network. During the past year, it has formed various partnerships to provide its products to Novaland (a leading property developer), Central Hill (an emerging condo developer of which ACG owns 30%) and NEM Furniture (a contractor/designer firm).

Consumer Discretionary - Phu Nhuan Jewelry ("PNJ")

Turning to one of the few Consumer Discretionary holdings in the portfolio, Phu Nhuan Jewelry (HOSE: PNJ, NAV 4.8%) released robust 2Q22 results, with net sales growing 81% y-o-y to USD345 million and net profit jumping by 64% y-o-y to USD16 million. In June alone, net profit came in at USD3.5 million, up 58% y-o-y. A strong performance was seen across key product lines in 2Q22, with the retail segment being the main driver with retail sales up 90% y-o-y, gold bar sales up 74% y-o-y, and wholesale sales rising 55% y-o-y, buoyed by strong consumer sentiment after all lockdown restrictions were removed across the country. Gross profit margins remained relatively steady in 2Q22 at 18%, a slight decrease from 19% in 2Q21 due to changes in product mix, elevated promotion activities, and higher input costs.

Following our recent company visit and meetings with the Chairwoman and the CEO, we have confidence in PNJ's outlook for 2022 post-COVID-19, as it continues to gain retail market share with growth underpinned by: (1) a resilient high-income and affluent customer base; (2) the company's more effective marketing activities as reflected by the improved retail gross profit margins despite aggressive promotions; and (3) PNJ's enhanced digitalisation capabilities which look to improve operational efficiency, lower SG&A to retail sales ratio (down 1.7% to 16.3%), and better retail growth compared to wholesale growth which suggests that PNJ has gained further market share. Thirteen new gold stores opened in 1H22, of which five were opened in June alone. PNJ anticipates that it will continue to deliver strong growth in 2H22, from a low base in 2H21 due to the COVID-19 lockdowns last year.

Consumer Discretionary - Nova Consumer Group ("NCG")

In March 2022 we completed a USD25 million investment into a rapidly growing consumer goods and agri-business company. Nova Consumer Group (OTC: NCG, NAV 2.1%) have been a leading Vietnamese company in the area of veterinary products and animal feed. The company expects to expand rapidly into consumer foods, milk, energy drinks and coffee products over the next few years. This is a pre-IPO opportunity and we expect that the company will list within the next 12 months on one of the main bourses. The terms of investment, typical of the investment terms discussed above, include a put option back to the company at a secured, minimum IRR, along with collateral coverage in excess of our investment amount.

Industrials Sector - Ngoc Nghia Industry Service Trading ("NNG")

Turning to divestments from the portfolio during the financial year, in March 2022 we completed the successful exit from Ngoc Nghia Industry - Service - Trading (UPCoM: NNG), which at the time was a top five private equity investment in the portfolio. We sold to Indorama Ventures which is a Thailand-based Indian chemical major, through a PTO process.

VOF invested USD17.4 million for a significant minority stake in NNG in December 2019, just prior to the global health pandemic. Since our investment, we supported the Company in strengthening corporate governance, restructuring the capital structure, and enhancing the process of capital expenditures and working capital management. As a result, the net debt has been reduced significantly by around 30% compared to when we made the investment. This divestment will deliver VOF 1.5 times return over 2.5 years, equivalent to an IRR of 20%.

It should be highlighted that all these investments and divestments we discuss above were all entered through a privately negotiated process, generally when these businesses were private and over time, several will "cross-over" to the public equity portfolio where we remain investors. The table above of our top 10 holdings in the public equities portfolio also highlights how we entered into these investments. In general, between 70% to 80% of the investments held in the public equity portfolio were entered through privately negotiated routes, with very few via on-market transactions, demonstrating that we remain committed to our core strategy and strive to maintain this point of differentiation.

Looking Ahead

VOF provides investors unique access to Vietnam's exciting, long-term growth opportunities through a fund that is professionally managed, with an almost 20-year track record of delivering sustainable returns to investors through economic and market cycles, and since 2016, is the only Vietnam-focused closed-ended fund that pays a dividend.

Our focus remains steady and consistent. We continue to dedicate our efforts to working on private equity and private finance (structured investment) opportunities. The uniqueness of our strategy and investment approach becomes even more apparent in the light of recent scandals that affected several listed companies, in that we are able to perform extensive due diligence on the company and sponsors.

Once we invest, we help companies put in good governance and disclosure practices, and our Business Enhancement Team supports these businesses to grow with professional and experienced managers. Furthermore, we believe that having an active role in the businesses we invest in is the best way to protect against risks. Having a portfolio of both listed and unlisted investments helps our investors ride out the inherent volatility that stock markets experience.

If we look back at the past 12 months, it is clear that there is a disconnect between Vietnam's Main Street and Wall Street, where we saw economic growth momentum accelerating, even as the stock market was taking a steep tumble. The macroeconomic picture for Vietnam remains solid, with growth estimates now revising upwards to 7.5%, one of the best for emerging and frontier markets. The economic worries that are plaguing global markets such as inflation, currency depreciation, and recession risk have all been less of a concern here in Vietnam and we expect them to remain relatively muted looking ahead. As such, we remain confident in the long-term opportunities that are available for active managers like ourselves to deliver stable, consistent, long-term performance for our investors.

On behalf of the team, I would like to express our sincere thanks to our investors who have remained committed to our strategy over the long-term. This is particularly appreciated during periods of volatility and uncertainty. We welcome every opportunity to meet with you, whether over the now all-too-familiar webinar calls, or in person particularly now that travel is returning to some semblance of normal.

Andy Ho

Chief Investment Officer and Managing Director

24 October 2022

VINACAPITAL MANAGEMENT TEAM

Don Lam

Group Chief Executive Officer

Don Lam is a founding partner of the Investment Manager and has more than 20 years' experience in Vietnam. He has overseen the Investment Manager's growth from the manager of a single USD10 million fund in 2003 into a leading investment management and real estate development firm in Southeast Asia, with a diversified portfolio of more than USD3 billion in assets under management. Before founding the Investment Manager, Mr Lam was a partner at PricewaterhouseCoopers (Vietnam), where he led the corporate finance and management consulting practices throughout the Indochina region. Additionally, Mr Lam set up the VinaCapital Foundation whose mission is to empower the children and youth of Vietnam by providing opportunities for growth through health and education projects. He is active in the World Economic Forum and is a member of several business task forces and committees in Vietnam. He has a degree in Commerce and Political Science from the University of Toronto and received an honorary doctorate from the Royal Melbourne Institute of Technology Vietnam. He is a Chartered Accountant and is a member of the Institute of Chartered Accountants of Canada. He also holds a Securities Licence in Vietnam.

Brook Taylor

Chief Executive Officer, VinaCapital Asset Management

Brook Taylor is the Chief Executive Officer of the Investment Manager. Mr Taylor has more than 20 years of management experience, including more than eight years as a senior partner with major accounting firms. Previously, he was deputy managing partner of Deloitte in Vietnam and head of the firm's audit practice. He was also managing partner of Arthur Andersen Vietnam and a senior audit partner at KPMG. Mr Taylor has lived and worked in Vietnam since 1997. Mr Taylor's expertise spans a broad range of management and finance areas including accounting, business planning, audit, corporate finance, taxation, and risk management. He holds an Executive MBA from INSEAD and a Bachelor of Commerce and Administration from Victoria University of Wellington.

Andy Ho

Managing Director and Group Chief Investment Officer

Andy Ho is Managing Director and Group Chief Investment Officer of the Investment Manager, where he oversees the capital markets, fixed income and private equity investment teams. Previously, Mr Ho was Director of Investment at Prudential Vietnam's fund management company, where he managed the capital markets portfolio and Prudential's investment strategy. He has also held management positions at Dell Ventures (the investment Company of Dell Computer Corporation) and Ernst & Young. Mr Ho is a leading authority on capital markets investment, privatisations, and private equity deals and structures in Vietnam, where he has led private placement deals totaling almost USD1 billion. He holds an MBA from the Massachusetts Institute of Technology and is a Certified Public Accountant in the United States.

Dieu Phuong Nguyen

Deputy Managing Director

Dieu Phuong joined VinaCapital in 2005 and is responsible for the Company's private equity investments and deal sourcing. Ms Phuong has led several private equity and private placement investments for the Company and holds board positions at several of the Company's investee companies including Khang Dien House (HOSE: KDH). Ms Phuong has previous experience at KPMG Vietnam where she covered international and local banks and holds a BA from the Banking University of Vietnam and is a fellow member of the ACCA (UK).

Khanh Vu

Deputy Managing Director

With over eleven years at VinaCapital, Khanh Vu is responsible for the Investment Manager's capital markets, portfolio management, investor relations and communication activities for the Company. He is also an active member of the fund's Investment Committee, involved in deal sourcing, investment execution and monitoring. Mr Vu has over 15 years of investment experience and has been based in Vietnam for the last nine years. Mr Vu has held managerial positions in corporate finance, asset management, investment banking, and professional services. Prior to VinaCapital, he was at Macquarie Bank based in New York and Sydney, with his last posting on the buy-side infrastructure asset management team. Prior to that, he held various positions with Deloitte & Touche and Arthur Andersen, based in Sydney. Mr Vu holds both master's and bachelor's degrees from the University of New South Wales, Sydney, and a Graduate Diploma of Applied Finance granted by the Financial Services Institute of Australia where he is a Fellow.

Michael Kokalari

Chief Economist

Michael Kokalari, CFA serves as VinaCapital's Chief Economist, and is responsible for providing thought leadership and technical acumen on a wide range of global and local macroeconomic issues with a view to maximising the firm's investment performance. Mr Kokalari has worked in Vietnam for nine years, and was previously the Head of Research at CIMB Securities Vietnam, and the CIO of Saigon Asset Management. Earlier in his career, Mr Kokalari was a derivatives trader in Tokyo & London where he ran multi-billion dollar trading books for Lehman Brothers, JP Morgan Chase, Credit Suisse First Boston, BNP Paribas and West LB. Mr Kokalari co-authored the CFA guide to Credit Derivatives, and was a contributor to "Risk Management: Foundations for a Changing Financial World" (published in 2010), along with Nobel Prize winners Myron Scholes and William Sharpe of Stanford University. Mr Kokalari holds an MS Engineering in Computational Mathematics from Stanford University, an MS Mathematics from Stanford, an MS Management from the Graduate School of Business at Stanford, and a BA Mathematics from Clark University, where he was a Gryphon and Pleiades Scholar.

BOARD OF DIRECTORS

Huw Evans

Non-executive Chairman (Independent)

(Appointed 27 May 2016)

Huw Evans is a Guernsey resident and qualified in London as a Chartered Accountant with KPMG (then Peat Marwick Mitchell) in 1983. He subsequently worked for three years in the Corporate Finance Department of Schroders before joining Phoenix Securities Limited in 1986. Over the next twelve years he advised a wide range of companies in financial services and other sectors in the UK and overseas on mergers and acquisitions and more general corporate strategy. Since moving to Guernsey in 2005 he has acted as a Director of a number of Guernsey based companies and funds. He holds an MA in Biochemistry from Cambridge University.

Thuy Bich Dam

Non-executive Director (Independent)

(Appointed 7 March 2014)

Ms Thuy Bich Dam began her career at Vietnam's Ministry of Science, Technology and Environment, responsible for coordinating treaties between the government and the World Intellectual Property Organisation and the European Patent Office. From 1996 to 2005, Ms Dam worked as the Natural Resources Director of ANZ Investment Bank (Singapore). Following this, Ms Dam was appointed as the CEO Vietnam, CEO Greater Mekong Region and Vice Chairwoman for the Greater Mekong Region for ANZ Bank Vietnam over a span of nearly eight years. Ms Dam was also the Chief Representative for the National Australia Bank, Vietnam from November 2013 to September 2016. She is currently the Founding President of Fulbright University Vietnam. She holds a bachelor's degree in English from Hanoi University, an MBA Finance from The Wharton School of Business and completed the Advanced Management Program at Harvard Business School.

Peter Hames

Non-executive Director (Independent)

(Appointed 24 June 2021)

Peter Hames spent 18 years of his investment career in Singapore, where in 1992 he co-founded Aberdeen Asset Management's Asian operation and, as director of Asian Equities, he oversaw regional fund management teams responsible for running a number of top-rated and award-winning funds. Peter is a former director of Polar Capital Technology Trust plc. and Syncona Ltd (formerly BACIT Ltd). Mr Hames is also director of MMIP Investment Management Limited, an independent member of the operating board of Genesis Investment Management, LLP and is a director of The Genesis Emerging Markets Investment Company.

Julian Healy

Non-executive Director (Independent)

(Appointed 23 July 2018)

Julian Healy has over thirty years' experience of banking, private equity and investment management in emerging and frontier markets. He holds an MA in Modern Languages from Cambridge University and is a member of the Institute of Chartered Accountants in England and Wales. He has been a non-executive director of a number of companies and financial institutions in emerging markets.

Kathryn Matthews

Non-executive Director (Independent)

(Appointed 10 May 2019)

Kathryn Matthews has been involved in financial services for the last 40 years. Her last executive role was as Chief Investment Officer, Asia Pacific (ex Japan), for Fidelity International. Prior to that, Kathryn held senior appointments with William M Mercer, AXA Investment Managers, Santander Global Advisers and Baring Asset Management. She has previously been on the Board of Directors of a number of investment companies including Fidelity Asian Values and JPMorgan Chinese Investment Trust. She is currently on the Board of Directors of Barclays UK Plc, Pendal Group in Australia and BII Group.

Hai Thanh Trinh

Non-executive Director (Independent)

(Appointed 30 June 2022)

Hai Thanh Trinh has over 30 years' business experience, having held various managerial and senior executive positions at financial services institutions in Vietnam and in the United States including An Binh Bank, Indochina Capital, New York Life and BAOVIET. He has recently retired as an Independent Director of Saigon Hanoi Commercial Bank. He currently also serves as Independent Director and Chairman of the Audit Committee for Van Phu Invest, a real estate developer in Vietnam which is listed on the Ho Chi Minh City Stock Exchange.

DISCLOSURE OF DIRECTORSHIPS IN OTHER PUBLIC COMPANIES LISTED ON RECOGNISED STOCK EXCHANGES

The Board is required to declare any potential conflicts at each meeting. During the year no Director reported any potential conflicts that may affect their independence.

CORPORATE GOVERNANCE STATEMENT

To comply with the UK Listing Regime, the Company must comply with the requirements of the UK Code. The Company is also required to comply with the Guernsey Code.

The Company is a member of the AIC and by complying with the AIC Code, the Company is deemed to comply with both the UK Code and the Guernsey Code.

The Board has considered the Principles and Provisions of the AIC Code. The AIC Code addresses the Principles and Provisions set out in the UK Code, as well as setting out additional Provisions on issues that are of specific relevance to the Company as an investment company.

The Board considers that reporting against the Principles and Provisions of the AIC Code, which has been endorsed by the Financial Reporting Council and the Guernsey Financial Services Commission provides relevant information to shareholders.

The AIC Code is available on the AIC website (www.theaic.co.uk). It includes an explanation of how the AIC Code adopts the Principles and Provisions set out in the UK Code to make them relevant for investment companies.

The Board is of the view that throughout the year ended 30 June 2022 the Company complied with the recommendations of the AIC Code. Key issues affecting the Company's corporate governance responsibilities, how they are addressed by the Board and application of the AIC Code are presented below.

Provision 1 of the AIC Code requires the annual report to set out the following information:

There is no information that is required to be disclosed under Listing Rule 9.8.4.

Section 172 Statement

Section 172 of the UK Companies Act applies directly to UK domiciled companies. Nonetheless, the intention of the AIC Code is that the matters set out in section 172 are reported on by all London listed investment companies, irrespective of domicile, provided that this does not conflict with local company law.

Section 172 states that: A director of a company must act in the way he or she considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to the following six items:

Purpose

The Company is an investment company and its purpose is to provide non-Vietnamese investors with the opportunity to achieve medium to long-term returns through investment in Vietnam.

Culture and Values

The Directors' overarching duty is to promote the success of the Company for the benefit of investors, with due consideration of other stakeholders' interests. The Company's approach to investment is explained in the Investment Manager's Report. The Board applies various policies and practices to ensure that the Board's culture is in line with the Company's purpose, values and strategy. The Directors aim to achieve a supportive business culture combined with constructive challenge.

The Company has a number of policies and procedures in place to assist with maintaining a culture of good governance including those relating to diversity, conflicts of interest, and dealings in the Company's shares. The Company's policy is to have zero tolerance of corruption, bribery and tax evasion either by the Company and its officers or by its suppliers.

The Board assesses and monitors compliance with these policies regularly through Board meetings and the annual evaluation process. The Board seeks to appoint the most appropriate service providers for the Company's needs and evaluates the services on a regular basis. The Board considers the culture of the Investment Manager and other service providers through regular reporting and by receiving regular presentations as well as through ad hoc interaction.

The Board also seeks to control the Company's costs, thereby enhancing performance and returns for the Company's shareholders. The Directors consider the impact on the community and environment.

ESG

The Board takes a close interest in ESG issues. As management of the portfolio is delegated to the Investment Manager, the practical implementation of policy rests with the Investment Manager. A description of the Investment Manager's approach to ESG issues is set out below and examples of how the Investment Manager carries out their ESG due diligence are included in the Investment Manager's Report.

Investment Manager's Approach to Responsible Investing

Responsible investing has been and continues to be a core tenet of VinaCapital's investment philosophy and process. VinaCapital, as a firm, has long recognised that ESG issues can have a significant impact on value creation across the investment cycle. The Investment Manager has adopted a Responsible Investment policy to formalise its approach to incorporating environmental, social, and corporate governance considerations across its investment activities. In developing this policy, VinaCapital has considered a range of codes and standards, including the United Nations-supported PRI, the IFC's Performance Standards on Environmental and Social Sustainability, and its internal policies.

As more institutional investors invest into Vietnam and Vietnamese businesses expand, ESG related matters have taken on greater importance. In recent years, the Investment Manager has witnessed situations in which shareholder value declined significantly when businesses polluted the environment, ignored global standards, relocated families from land without paying adequate compensation, or did not adhere to international best practices with respect to corporate governance.

VinaCapital has developed a framework to identify ESG risks at potential investee companies, and helps businesses improve their practices, where appropriate, by incorporating ESG terms as part of its overall terms of investment in private opportunities. VinaCapital engages expert advisors and consultants to evaluate ESG risks as part of its due diligence activities prior to investing, as well as monitoring any applicable remediation actions post-investment.

VinaCapital has committed to adopting and implementing the PRI, which VinaCapital believes is in the best long-term interests of its investors, and which contributes to a more long-term oriented, transparent, sustainable, and well-governed investment market. While VinaCapital aims to adopt best practices of ESG in its investment activities and at its portfolio companies, VinaCapital also takes a pragmatic approach, recognising the limitations of investing in developing markets. VinaCapital therefore focuses less on screening companies solely on ESG issues, and more on stewardship activities where VinaCapital believes a patient timeframe and active engagement can improve outcomes.

VinaCapital believes ESG considerations materially impact long term value creation and has therefore integrated ESG considerations into the investment decision making process. This is typically done through a combination of screening and integration strategies, where possible. As stewards of its investors' capital, VinaCapital systematically engages with its investee companies on ESG matters. VinaCapital's engagement

takes various forms including voting, direct discussions with management, and educational initiatives, among others.

Specifically, ESG forms a core part of the due diligence and investment activities that VOF carries out, particularly when it comes to making private equity investments, as this is an area in which VinaCapital can exert influence within its portfolio companies. Through its private equity investment approach, VinaCapital has an opportunity to carry out ESG due diligence using external consultants, or through its in-house ESG expertise.

The due diligence review typically identifies weaknesses relative to local and international standards. Such weaknesses do not necessarily deter us from an investment but rather provide a clear roadmap for improvement. Importantly, with the recommendations for change, VinaCapital can gauge whether a sponsor is motivated to make these improvements to their business. VinaCapital feels that the most value-add to the business and in society comes from the motivation for change and the actions that a company takes to improve ESG weaknesses and, thus, VinaCapital gravitates more towards these types of opportunities and sponsors.

When it comes to publicly listed companies, VinaCapital has implemented a rigorous framework to assess ESG risks and encourage companies to improve their practices when warranted. VinaCapital's portfolio managers, and in-house ESG and research teams regularly engage with management on ESG policies and practices. The discussions around ESG revolve around VinaCapital's proprietary framework of over 200 questions, that cover 17 areas of focus, that touches on management and corporate structure; business ethics; energy, water, pollution, waste management, and Greenhouse Gas emissions; biodiversity; employee related issues such as wages, health, employment conditions; and community impacts. These questions result in a transparent and quantitative grading system for each publicly listed company.

Currently VinaCapital's research team has made over 80 assessments of publicly listed companies, including those held in the VOF public equity portfolio. VinaCapital applies this evaluation to the listed part of the VOF portfolio to determine the weighted average results of the portfolio at the current point in time. With this understanding, VinaCapital can set a benchmark as to where it will like VOF's portfolio to be in the next twelve to twenty-four months. Actions such as encouraging management teams to make impactful improvements or divesting holdings that rank poorly by ESG standards will be taken to achieve VinaCapital's objectives.

Investment Manager's Approach to Voting

As stewards of its investors' capital, VinaCapital systematically engages with its investee companies on governance and voting matters. VinaCapital's engagement takes various forms including voting, direct discussions with management, and education initiatives, among others.

As part of VinaCapital's Voting Policy that applies to all funds that VinaCapital manages, a core principle is that VinaCapital seeks to actively participate and vote, directly or through proxy voting, on all resolutions, particularly resolutions associated with the following matters:

● Corporate governance issues, including changes in the statutes of incorporation (such as amendments to the memorandum and/or articles of association), takeover, merger or disposal, acquisition and other corporate restructuring, and anti-takeover provisions;

● Changes to capital structure, including increases and decreases of capital and preferred stock issuances, approval of rights, bonus issue and warrants, and special dividend distributions (dividends in specie);

● Amendments to stock option schemes and other management compensation issues;

● Environmental, Social and Corporate responsibility issues; and

● Any other issues that may significantly affect VOF's interests.

VinaCapital has published its ESG Policy on VinaCapital's website and encourages investors to review the policies and principles that guide VinaCapital's approach to responsible investing and stewardship.

Stakeholders

The Company is an externally managed investment company whose activities are all outsourced. It does not have any employees. The Board has identified its key stakeholders, and how the Company engages with them, in the table below:

While portfolio investments are not stakeholders in the conventional sense, the Board acknowledges its responsibility to ensure where possible that investee companies adhere to good standards of conduct with regard to their own stakeholders. In some cases, the Investment Manager may have the capacity to affect these matters directly; in others, the scale of the Company's investment gives it the ability to influence the management of its investee holdings.

During the year, the Board undertook a number of activities and made a number of strategic decisions which fall under the Section 172 scope set out above:

- As part of his preparation for assuming the Chairmanship, Huw Evans met a number of the Company's major shareholders in order to understand their views on the Company.

- Throughout the year, the Board regularly reviewed the discount to net asset value at which the Company's shares trade and supervised the share buyback programme.

- Following the partial lifting of restrictions on travel to Vietnam, three of the non-Vietnamese Directors visited Vietnam during the year, taking the opportunity to discuss developments in VinaCapital's investment process in depth, to visit some investee companies and reaffirm their relationships with the Investment Manager.

- In October 2021, the Board elected to increase the half-yearly dividend by 33% to 8 cents per share. This increase was in recognition of the importance of dividend income to some shareholders and reflected the strong increase in NAV in the preceding accounting year.

Relations with Shareholders

A detailed analysis of the substantial shareholders of the Company is provided to the Directors at each Board meeting. The Chairman and representatives of the Investment Manager are available to meet shareholders to discuss strategy and to understand any issues and concerns which they may have and, if appropriate, to discuss corporate governance issues. The results of such meetings are reported at the following Board meeting.

Regular reports from the Company's brokers on investor sentiment and industry issues are submitted to the Board.

Shareholders wishing to communicate with the Chairman, the SID or any other member of the Board, may do so by writing to the Company, for the attention of the Company Secretary, at the Registered Office. The Directors welcome the views of all shareholders and place considerable importance on communications with them.

The Company aims to provide shareholders with a full understanding of the Company's investment objective, policy and activities, its performance and the principal investment risks by means of informative Annual and Half Year reports. This is supplemented by the publication by the Investment Manager of a monthly fact sheet, both daily and weekly estimates of the NAV per share and a regular series of video presentations, all of which are available on the Company's website, https://vof.vinacapital.com.

The Annual General Meeting of the Company provides a forum for shareholders to meet and discuss issues with the Directors of the Company.

Re-election and Tenure of Directors

As set out in the AIC Code Directors should submit themselves for annual re-election and in any event as soon as it is practical after their initial appointment to the Board. It is a further requirement that non-executive Directors be appointed for a specific period. The Board has adopted a formal policy requiring that Directors should stand down at the AGM following the ninth anniversary of their initial appointment.

The individual performance of each Director standing for election or re-election has been evaluated by the other members of the Board and a recommendation will be made that shareholders vote in favour of their election or re-election at the AGM.

Board Proceedings and Relationship with the Investment Manager

The Chairman encourages open debate to foster a supportive and co-operative approach for all participants.

The Board is required by the AIC Code to explain in the annual report the areas of decision making reserved for the Board and those over which the manager has discretion. Investment performance is discussed in the Chairman's Statement, and management of risk is described below. A description of the approach to ESG matters is set out above.

The Board meets regularly throughout the year and representatives of the Investment Manager are in attendance, when appropriate, at each meeting and most Committee meetings. During the year under review, global travel restrictions were eased and the Board was able to hold one meeting in person with the Investment Manager in Vietnam. Going forward, the Board plans to arrange a combination of video conferences and meetings in person, while recognising the environmental impact of international travel.

The Board is responsible for strategy and has established an annual programme of agenda items under which it reviews the objectives and strategy for the Company at each meeting.

The Board, at its regular meetings, undertakes reviews of: key investment and financial data, revenue projections and expenses, analyses of asset allocation, transactions, share price and NAV performance, marketing and shareholder communication strategies, the risks associated with pursuing the investment strategy, peer company information and industry issues.

The Board has agreed a schedule of matters specifically reserved for decision by the Board. This includes establishing the investment objectives, strategy and benchmarks, the permitted types or categories of investments, the markets in which transactions may be undertaken, the level of permitted borrowings, the amount or proportion of the assets that may be invested in any category of investment or in any one investment, and the Company's treasury share and share buyback policies. Representatives of the Investment Manager

attend each meeting of the Board to address questions on specific matters and to seek approval for specific transactions which the Investment Manager is required to refer to the Board.

The Investment Management Agreement between the Company and the Investment Manager sets out the limits of the Investment Manager's authority, beyond which Board approval is required. The Board has also agreed detailed investment guidelines with the Investment Manager, which are considered at each Board meeting. The Investment Manager is generally responsible for routine announcements of information but the Board is responsible for communications regarding major corporate issues.

The Board has delegated discretion to the Investment Manager to exercise voting powers in investee companies on the Company's behalf.

The Directors have access to the advice and services of the Company Secretary, who is responsible to the Board for ensuring that the Directors are aware of the procedures to be followed. The Company Secretary is also responsible for ensuring good information flows between all parties.

At Board meetings the Company Secretary provides a report in which the Directors are given key information on the Company's regulatory and statutory requirements as they arise, including information on the role of the Board, matters reserved for its decision, the terms of reference for the Board Committees, the Company's corporate governance practices and procedures and the latest financial information. It is the Chairman's responsibility to ensure that the Directors have sufficient knowledge to fulfil their role and Directors are encouraged to participate in training courses where appropriate.

Board Committees

There are four Board committees in operation: the Audit Committee, Management Engagement Committee, Remuneration Committee and Nomination Committee. The chairmanship and membership of each Committee throughout the year, and the number of meetings held during the year, are shown in the table below. A summary of the duties of each of the Committees is provided below. The terms of reference of each Committees can be obtained from the Company's Administrator.

Audit Committee

The Audit Committee, which meets at least three times a year, comprises all of the Directors and is chaired by Julian Healy. The Chairman of the Company is a member of the Audit Committee but does not chair it. His membership of the Audit Committee is considered appropriate given the Chairman's extensive knowledge of the Company and its investments.

The Audit Committee is responsible for monitoring the process of production and ensuring the integrity of the Company's Financial Statements and advises the Board whether the Annual Report and Financial Statements are fair, balanced and understandable.

One of the key responsibilities of the Audit Committee is to oversee the relationship with the External Auditor. In discharging its responsibility to oversee the External Auditor's independence, the Audit Committee considers whether any other engagements provided by the External Auditor will have an effect on, or perception of, compromising the External Auditor's independence and objectivity. The provision of services in addition to external audit must be specific and approved by the Audit Committee.

The Audit Committee is also responsible for recommending to the Board the valuation of investments. In seeking to determine the fair value of the Company's operating asset, private equity investments, the Committee reviews the reports of independent valuation specialists as well as reviewing the Investment Manager's valuation process and recommendations. Each individual valuation is reviewed in detail and, where an Independent Valuer has been retained, their recommendation may be accepted or modified. Refer to note 3 to the Financial Statements for further information on the valuation of investments held by the Company.

As set out under Internal Controls and Risk within the Corporate Governance Statement, the Company's risk exposure and the effectiveness of its risk management and internal control systems are reviewed by the Audit Committee and considered by the Board at each scheduled meeting. An internal audit function specific to the Company is considered unnecessary as all operations are outsourced to third parties.

A report of the Audit Committee detailing responsibilities and activities is presented after the Statement of Directors' Responsibilities.

The Audit Committee Chairman presents the Committee's findings to the Board at the next Board meeting following each meeting of the Audit Committee.

Management Engagement Committee

The Management Engagement Committee comprises all of the Directors and is chaired by Kathryn Matthews. The Committee's responsibilities include reviewing the performance of the Investment Manager under the Investment Management Agreement and considering any variation to the terms of the agreement. The Management Engagement Committee also reviews the performance of the Company Secretary, Corporate Brokers, Custodian, Administrator, Registrar, other key service providers and any matters concerning their respective agreements with the Company.

Remuneration Committee

The Remuneration Committee comprises all of the Directors and is chaired by Thuy Bich Dam. As the Board consists entirely of non-executive directors, and committee meetings are generally arranged to coincide with Board meetings, the Board has decided that it is appropriate that all Directors should be members of the Remuneration Committee. The Committee's responsibilities include recommending to the Board the policy for the remuneration of the Company's Chairman, the Audit Committee Chairman and the remaining non-executive directors, and reviewing the ongoing appropriateness and relevance of the remuneration policy; determining the individual remuneration of each non-executive director; and the selection and appointment of any remuneration consultants who advise the Committee.

The Directors' Remuneration Report is presented after the Report of the Audit Committee.

Nomination Committee

The Nomination Committee comprises all of the Directors and is chaired by Huw Evans. As the Board consists entirely of non-executive directors, and committee meetings are generally arranged to coincide with Board meetings, the Board has decided that it is appropriate that all Directors should be members of the Nomination Committee. The Committee's responsibilities include reviewing the structure, size and composition of the Board and making recommendations to the Board in respect of any changes; succession planning for the Chairman and the remaining non-executive directors; making recommendations to the Board concerning the membership and chairmanship of the Board committees; identifying and nominating for the approval of the Board candidates to fill Board vacancies; and, before any new appointment is recommended, evaluating the balance of skills, knowledge, experience and diversity within the Board and preparing an appropriate role description. The Chairman absents himself from discussions on succession to his own role.

Board Composition

As at the date of this report the Board consists of six non-executive directors, each of whom is independent of the Investment Manager. No member of the Board is a Director of another investment company managed by the Investment Manager, nor has any Board member been an employee of the Company, its Investment Manager or any of its service providers.

Julian Healy was appointed as the SID at a meeting of the Board on 2 December 2021. The SID provides shareholders with someone whom they can contact if they have concerns which cannot be addressed through the normal channels. The SID is also available to act as an intermediary between the other Directors and the Chairman (if required). The role serves as an important check and balance in the governance process.

The Board reviews the independence of the Directors at least annually.

The Board believes that each Director has appropriate qualifications, industry experience and expertise to guide the Company and that the Board as a whole has an appropriate balance of skills, experience, background and knowledge. As at the date of this report, the Board comprises four men and two women. Two of the directors are Vietnamese and resident in Vietnam. The Directors' biographies can be found within the Board of Directors section.

Appointment of New Directors

The Board seeks to ensure that any vacancies arising are filled by the best qualified candidates. The Board's policy on diversity is that the Company's Directors should bring a wide range of skills, knowledge, experience, backgrounds and perspectives to the Board. All appointments are made on merit, and in the context of the skills, knowledge and experience that are needed for the Board to be effective. Part of the remit of the Board's Nomination Committee is, before any new appointment is recommended, evaluating the balance of skills, knowledge, experience and diversity within the Board.

For new appointments to the Board, nominations are sought from the Directors and from other relevant parties, and independent search consultants are appointed when appropriate. Candidates are then interviewed by members of the Nomination Committee. The Board has a breadth of experience relevant to the Company, and the Directors believe that any changes to the Board's composition can be managed without undue disruption. An induction programme is provided for newly-appointed Directors.

 Board and Committee Meetings

During the year ended 30 June 2022, the number of scheduled Board and Committee meetings attended by each Director was as follows:

1 Steve Bates retired on 2 December 2021.

2 Hai Thanh Trinh was appointed on 30 June 2022.

In addition to the scheduled meetings noted above, a number of ad hoc meetings were held during the year which were attended by those Directors available at the time.

Board Performance

The Board has a formal process to evaluate its own performance and that of its Chairman annually. The provisions of the AIC Code require a FTSE 350 company to have its annual evaluation carried out in conjunction with an independent agency every three years and a review was carried out in 2022 by the Company's external evaluator, Lintstock Ltd. There are no other connections between Lintstock Ltd, the Company and any members of the Board. Lintstock raised no issues of significance and, following this review, the Board was satisfied that the structure, mix of skills and operation of the Board continue to be effective and relevant for the Company.

The Board must ensure that the Annual Report and Financial Statements taken as a whole are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's performance, business model and strategy. In seeking to achieve this, the Directors have set out the Company's investment objective and policy and explain how the Board and its delegated Committees work and how the Directors review the risk environment in which the Company operates and set appropriate risk controls. Furthermore, throughout the Annual Report the Board has sought to provide comprehensive information to enable shareholders to understand the Company's business and financial performance.

Internal Controls and Risk

(i) Risk Management System

Day to day management of risk is the responsibility of the Investment Manager, whose ERM framework provides a structured approach to managing risk across all of its managed funds by establishing a risk management culture through education and training, formalised risk management procedures, defining roles and responsibilities with respect to managing risk, and establishing reporting mechanisms to monitor the effectiveness of the framework. The Audit Committee works closely with the Investment Manager on the application, consideration and review of the ERM framework to the Company's risk environment.

Regular risk assessments and reviews of internal controls are undertaken by the Audit Committee. At each meeting, the Board considers both previously identified and emerging risks. The Administrator and Corporate Secretary and other service providers are also encouraged to provide their views on emerging risks. The reviews cover the strategic, investment, operational and financial risks facing the Company. In arriving at its judgement of the risks which the Company faces, the Board has considered the Company's operations in light of the following factors:

● the nature and extent of risks which it regards as acceptable for the Company to bear within its overall business objective;

● the threat of such risks becoming reality;

● the Company's ability to reduce the incidence and impact of risk on its performance; and

● the cost to the Company and benefits related to the Company of third parties operating the relevant controls.

(ii) Internal Control Assessment Process

Responsibility for the establishment and maintenance of an appropriate system of internal control rests ultimately with the Board. However, the Board is dependent on the Investment Manager and other service providers to achieve this and a process has been established which seeks to:

● review the risks faced by the Company and the controls in place to address those risks;

● identify and report changes in the risk environment;

● identify and report changes in the operational controls;

● identify and report on the effectiveness of controls and errors arising; and

● ensure no override of controls by the Investment Manager or Administrator or any other service providers.

The key procedures which have been established to provide effective internal financial controls are as follows:

● investment management is provided by the Investment Manager. The Board is responsible for the overall investment policy and monitors the investment performance, actions and regulatory compliance of the Investment Manager at regular meetings;

● accounting for the Company and subsidiaries is provided by Aztec Group;

● fund administration is provided by Aztec Group;

● custody of those assets which can be held by a third party custodian is undertaken by Standard Chartered Bank;

● the Management Engagement Committee monitors the contractual arrangements with each of the key service providers and their performance under these contracts;

● mandates for authorisation of investment transactions and expense payments are set by the Board and documented in the Investment Management Agreement;

● the Board receives financial information produced by the Investment Manager on a regular basis. Board meetings are held at least four times per year to review such information; and

● actions are taken to remedy any significant failings or weaknesses, if identified.

(iii) Risk Management

For the purposes of making the Viability Statement, the Board has undertaken a robust review of the principal risks and uncertainties (and monitors emerging risks at each quarterly board meeting) facing the Company including those that would threaten its business model, future performance, solvency or liquidity. The risk matrix and heat map prepared by the Investment Manager and subject to detailed scrutiny by the Audit Committee are the key tools in this review, along with a mechanism at each quarterly Board meeting to consider and monitor any emerging risks. The principal risks are described in the following table together with a description of the mitigating actions taken by the Board.

(iv) Internal Audit Function

The Audit Committee has reviewed the need for an internal audit function for the Company itself. The Committee has concluded that the systems and procedures employed by the Investment Manager and the Administrator, including their own internal audit functions, currently provide sufficient assurance that a sound system of internal control, which safeguards the Company's assets, is maintained. As all operations of the Company are outsourced to third parties, an internal audit function specific to the Company is therefore considered unnecessary. The Investment Manager has appointed KPMG Vietnam as its internal auditor.

Directors' Dealings

The Company has adopted a Code of Directors' Dealings in Securities.

International Tax Reporting

For purposes of the US Foreign Account Tax Compliance Act, the Company registered with the IRS as a Guernsey reporting FFI, received a Global Intermediary Identification Number (GUHZUZ.99999.SL.831), and can be found on the IRS FFI list.

The CRS is a global standard developed for the automatic exchange of financial account information developed by the OECD, which was adopted in Guernsey and which came into effect on 1 January 2016.

The Company made its latest report for CRS to the Guernsey Director of Income Tax in June 2022.

The Board ensures that the Company is compliant with Guernsey regulations and guidance in this regard.

Share Capital and Treasury Shares

The number of shares in issue at the year-end is disclosed in note 11 to the Financial Statements.

Directors' Interests in the Company

As at 30 June 2022 and 30 June 2021, the interests of the Directors in shares of the Company are as follows:

There have been no changes to any holdings between 30 June 2022 and the date of this report.

Substantial Shareholdings

As at 30 June 2022 and 30 September 2022, the Directors are aware of the following shareholders with holdings of more than 3% of the ordinary shares of the Company:

* This shareholder held less than 3% as 30 September 2022.

Annual General Meeting

The Company's next AGM is due to be held in Guernsey at the offices of Aztec Group at 11:00 on 5 December 2022.

Ongoing Charges

Ongoing charges are the recurring expenses incurred by the Company, excluding one-off expenses. Ongoing charges for the years ended 30 June 2022 and 30 June 2021 have been prepared in accordance with the AIC's recommended methodology. The ongoing charges excluding incentive fees for the year ended 30 June 2022 were 1.50% (30 June 2021: 1.64%). Ongoing charges including incentive fees for the year ended 30 June 2022 were 0.89% (30 June 2021: 7.72%). Please refer to the glossary for the calculation of these figures. The ongoing charges figure including incentive fees for the year to 30 June 2022 includes the effect of the reduction in the accrual for carried forward incentive fees as described in note 16(b) of the accounts. Percentages are calculated based on the average NAV during the financial year.

Going Concern and Viability Statement

As noted, the Directors have undertaken a robust review of the principal risks and uncertainties (including emerging risks) facing the Company and for the purposes of complying with the AIC Code, have assessed the viability of the Company over the three years to 30 June 2025. The Directors consider this period sufficient given the inherent uncertainty of the investment world and the specific issues which the Company faces in investing in Vietnam.

An additional factor which the Directors have considered is the discontinuation vote which will be put to shareholders at the AGM towards the end of 2023. In seeking to ensure that shareholders retain confidence in the Company, the Investment Manager meets regularly with shareholders and has an active investor relations programme. In addition, the Chairman communicates independently with significant shareholders. The Directors cannot predict the outcome of the discontinuation vote but currently have no indication that the vote will be passed and, in making this going concern and viability statement, have assumed that the Company will continue to operate in its present form.

The Directors, having considered the above risks and other factors, have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the three-year period of their assessment.

After making enquiries and given the nature of the Company and its investments, the Directors are also satisfied that there are no material uncertainties and that it is appropriate to continue to adopt the going concern basis in preparing these Financial Statements

REPORT OF THE BOARD OF DIRECTORS

The Board submits its Annual Report together with the Financial Statements of the Company for the year ended 30 June 2022.

The Company is a Guernsey domiciled closed-ended investment company. The Company is classified as a registered closed-ended Collective Investment Scheme under the Protection of Investors (Bailiwick of Guernsey) Law, 2020 and is subject to the Guernsey Law.

The Company is quoted on the Main Market of the LSE with a Premium Listing (ticker: VOF).

The Company's investments continue to be managed by the Investment Manager.

Principal Activities

Through its investments in subsidiaries and associates, the Company's objective is to achieve medium to long-term returns through investment in assets either in Vietnam or in companies with a substantial majority of their assets, operations, revenues or income in, or derived from, Vietnam.

Life of the Company

The Company does not have a fixed life but the Board considers it desirable that shareholders should have the opportunity to review the future of the Company at appropriate intervals. Accordingly, the Board intends that every fifth year a special resolution will be proposed that the Company ceases to continue. If the resolution is not passed, the Company will continue to operate as currently constituted. If the resolution is passed, the Directors will be required to formulate proposals to be put to shareholders to reorganise, unitise or reconstruct the Company or for the Company to be wound up. The Board tabled such resolutions in 2008, 2013 and 2018 and on each occasion the resolution was not passed, allowing the Company to continue as currently constituted. The next such resolution will be put to shareholders in 2023.

Investment Policy

All of the Company's investments will be in Vietnam or in companies with at least 75% of their assets, operations, revenues or income in, or derived from, Vietnam at the time of investment.

● No single investment may exceed 20% of the NAV of the Company at the time of investment.

● The Company may from time to time invest in other funds focused on Vietnam. This includes investments in other funds managed by VinaCapital Investment Management Limited (the "Investment Manager"). Any investment or divestment of funds managed by the Investment Manager will be subject to prior approval by the Board.

● The Company may from time to time make co-investments alongside other investors in private equity, real estate or similar assets. This includes, but is not restricted to, co-investments alongside other funds managed by the Investment Manager.

● The Company will not invest in other listed closed-ended funds.

The Company may gear its assets through borrowings which may vary over time according to market conditions and any or all of the assets of the Company may be pledged as security for such borrowings. Borrowings will not exceed 10% of the Company's total assets at the time that any debt is drawn down.

From time to time the Company may hold cash or low risk instruments such as government bonds or cash funds denominated in either VND or USD), either in Vietnam or outside Vietnam.

Valuation Policy

The accounting policy for valuations can be found in note 2.7 to the Financial Statements.

Performance

The Chairman's Statement and the Investment Manager's Report provide details of the Company's activities and performance during the year.

In light of the Company's Investment Objective, the KPIs used to measure the progress of the Company during the year were:

● the movement in the Company's NAV total return;

● the movement in the Company's share price; and

● discount of the share price in relation to the NAV.

Information relating to the KPIs can be found in the Financial Highlights section.

A discussion of progress against the KPIs is included in the Chairman's Statement.

Distribution Policy

Dividend Policy

The Company intends to pay a dividend representing approximately 1% of NAV twice each year, normally declared in March and October.

The policy will be subject to shareholder approval at each annual general meeting.

Share Buybacks

The Company may also distribute capital by means of share buybacks when the Board believes that it is in the best interests of shareholders to do so. The share buyback programme will be subject to Shareholder approval at each annual general meeting.

Discount Management

The Board will continue to operate the share buyback programme in line with the objective of ensuring that the share price more closely reflects the underlying NAV per share.

The Board will continue to retain responsibility for setting the parameters for the discount management policy, for overseeing the management of the buyback programme and for ensuring that its policy is implemented. The Board intends to continue to seek to narrow the discount through the continued use of share buybacks and active marketing of the Company. The Board's objective is to achieve a narrowing of the discount in a manner that is sustainable over the longer term. The Board and the Investment Manager intend to consult regularly with shareholders with a view to assessing and improving the effectiveness of the buyback programme. Further comments on the buyback programme are set out in the Chairman's Statement.

Refer to note 11 of the Financial Statements for details of share buybacks during the year under review.

Subsequent Events after the Reporting Date

On 24 October 2022, the Board declared a dividend of 8.0 US cents per share. The dividend is payable on or around 5 December 2022 to shareholders on record at 4 November 2022.

On behalf of the Board

Huw Evans

Chairman

VinaCapital Vietnam Opportunity Fund Limited

24 October 2022

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The Directors are responsible for preparing the Financial Statements for each financial year which give a true and fair view of the state of affairs of the Company and of its profit or loss for that year in accordance with IFRS and the Guernsey Law. International Accounting Standard 1 - Presentation of Financial Statements requires that financial statements present fairly for each financial period the Company's financial position, financial performance and cash flows. This requires the faithful representation of the effects of transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the IASB's "Framework for the preparation and presentation of financial statements". In virtually all circumstances a fair presentation will be achieved by compliance with all applicable IFRS.

The Directors are also responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and to ensure that the Financial Statements have been prepared in accordance with the Guernsey Law and IFRS. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the oversight of the maintenance and integrity of the corporate and financial information in relation to the Company's website; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website. Legislation in Guernsey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

In preparing the Financial Statements the Directors are required to:

● ensure that the Financial Statements comply with the Company's Memorandum & Articles of Incorporation and IFRS;

● select suitable accounting policies and apply them consistently;

● present information including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

● make judgements and estimates that are reasonable and prudent;

● prepare the Financial Statements on the going concern basis, unless it is inappropriate to presume that the Company will continue in business; and

● provide additional disclosures when compliance with the specific requirements of IFRS is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Company's financial position and financial performance.

The Directors confirm that they have complied with these requirements in preparing the Financial Statements.

Responsibility Statement of the Directors in Respect of the Financial Statements

The Directors consider that the Annual Report and Financial Statements, taken as a whole, are fair, balanced and understandable and provide information necessary for shareholders to assess the Company's position, performance, business model and strategy. Each of the Directors confirms to the best of each person's knowledge and belief that:

a) the Financial Statements have been prepared in accordance with IFRS and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company as at and for the year ended 30 June 2022; and

b) the Annual Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that the Company faces as required by DTR 4.1.8R and DTR 4.1.11R.

Directors' Statement

So far as each of the Directors is aware, there is no relevant audit information of which the Company's External Auditor is unaware, and each Director has taken all of the steps that they ought to have taken as a Director to make themselves aware of any relevant audit information and to establish that the Company's External Auditor is aware of that information. In the opinion of the Board, the Annual Report and Financial Statements taken as a whole, are fair, balanced and understandable and provide the information necessary to assess the Company's performance, business model and strategy.

On behalf of the Board

Huw Evans

Chairman

VinaCapital Vietnam Opportunity Fund Limited

24 October 2022

REPORT OF THE AUDIT COMMITTEE

On the following pages, we present the Report of the Audit Committee for the year ended 30 June 2022, setting out the Audit Committee's structure and composition, principal duties and key activities during the year. As in previous years, the Audit Committee has reviewed the Company's financial reporting, the independence and effectiveness of the External Auditor and the internal control and risk management systems of the service providers.

Structure and Composition

The Audit Committee is chaired by Julian Healy who succeeded Huw Evans on 2 December 2021. All other Directors of the Company are members of the Audit Committee. Hai Thanh Trinh joined the Audit Committee on his appointment to the Board on 30 June 2022.

Appointment to the Audit Committee is for a period of up to three years which may be extended for two further three-year periods provided that the majority of the Audit Committee remain independent of the Investment Manager.

The Committee conducts formal meetings at least three times a year. The table in the Report of the Board of Directors sets out the number of Audit Committee meetings held during the year ended 30 June 2022 and the number of such meetings attended by each committee member. The External Auditor is invited to attend those meetings at which the audit plan for the year is reviewed and at which the annual and interim reports are considered. The External Auditor and the Audit Committee Chairman meet every year without the presence of either the Administrator or the Investment Manager and at other times if the Audit Committee deems this to be necessary.

Principal Duties

The role of the Audit Committee includes:

● monitoring the integrity of the published Financial Statements of the Company and advising the Board on whether, taken as a whole, the Annual Report and Financial Statements are (i) fair, balanced and understandable and (ii) provide the information necessary for shareholders to assess the Company's performance, business model and strategy;

● reviewing and reporting to the Board on the significant issues and judgements made in the preparation of the Company's Annual Report and Financial Statements, having regard to matters communicated by the External Auditor, significant financial returns to regulators and other financial information;

● monitoring and reviewing the quality and effectiveness of the External Auditor and their independence and making recommendations to the Board on their appointment, reappointment, replacement and remuneration;

● carrying out a robust assessment of the principal risks facing the Company and including in the Annual Report and Financial Statements a description of those risks and explaining how they are being managed or mitigated; and

● recommending valuations of the Company's investments to the Board.

External Auditor

PwC CI was appointed as the External Auditor with effect from 24 May 2016 following the change of domicile of the Company from the Cayman Islands to Guernsey.

The independence and objectivity of the External Auditor is reviewed by the Audit Committee, which also reviews the terms under which the External Auditor is appointed to perform any non-audit services. The Audit Committee has established policies and procedures governing the engagement of the External Auditor to provide non-audit services. These are that the External Auditor may not provide a service which:

● places them in a position to audit their own work;

● creates a mutuality of interest;

● results in the External Auditor functioning as a Manager or Employee of the Company; and

● puts the External Auditor in the role of Advocate of the Company.

The audit and any non-audit fees proposed by the External Auditor each year are reviewed by the Audit Committee taking into account the Company's structure, operations and other requirements during the period and the Committee makes recommendations to the Board.

The Audit Committee has examined the scope and results of the external audit, its cost effectiveness and the independence and objectivity of the External Auditor, with particular regard to non-audit fees, and considers PwC CI, as External Auditor, to be independent of the Company.

The External Auditor is required to rotate the Audit Engagement Partner responsible for the Company's audit every five years. The accounting year to 30 June 2022 was the second year for which Evelyn Brady has been the Audit Engagement Partner.

Key Activities

The following sections discuss the principal assessments made by the Audit Committee during the year:

Risk Management

The Audit Committee received and reviewed detailed reports on the principal risks facing the Company from the Investment Manager. The Audit Committee's reviews focused on changes to the risks and also considered whether the Company was subject to any new or emerging risks, taking account of the views of the Investment Manager, of other service providers and of Committee members' own awareness of issues which may affect the Company. In the year under review, particular attention was paid to (i) macroeconomic, market, pricing and currency risk; (ii) the business, legal and regulatory compliance environment; (iii) the valuation of investments; (iv) governance and internal controls assessment; (v) portfolio construction; (vi) monitoring of private equity investments; and (vii) the growing focus by investors on ESG matters.

Significant Financial Statement Issues

(a) Valuation of Investments

The fair value of the Company's investments at 30 June 2022 was USD1,206 million accounting for 98.6% of the Company's assets (30 June 2021: USD1,353 million and 94.7%, respectively).

In relation to the listed investments and unlisted investments where an active market exists, the Audit Committee confirmed that the Investment Manager has used the market values published by the relevant stock exchanges as at the Statement of Financial Position date.

In relation to the operating asset and private equity investments, the Audit Committee ensured that the Investment Manager and, where relevant, the Independent Valuer have applied appropriate valuation methodologies.

Significant Financial Statement Issues

(a) Valuation of Investments (continued)

Members of the Audit Committee meet the Independent Valuer and the Investment Manager at least annually to discuss the valuation process. The Audit Committee gains comfort in the valuations produced by reviewing the methodologies used. The methodologies and valuations were discussed and subsequently approved by the Audit Committee in meetings with the Independent Valuer and the Investment Manager in September and October 2022. In these meetings, the Audit Committee challenged the unobservable inputs applied to projected future returns and in particular as to whether these take due account of the effects of heightened global inflation, macroeconomic and specific company and industry risks, as well as the possible effects of climate change.

The Independent Valuer and the Investment Manager were invited to justify the approach to these issues and confirmed that due account had been taken of the relevant risks.

The Audit Committee regularly reviews the movement in valuations year on year including sensitivity factors affecting the valuations.

(b) Calculation of the incentive fee and determination of fair value of the liability

As a result of the fall in NAV over the year, part of the accrual for incentive fees carried forward from the prior year was written back. The incentive fee is calculated by the Administrator, which is independent of the Investment Manager.

The Audit Committee sought assurance both that the incentive fee and associated accruals were correctly calculated in compliance with the investment management agreement, and that an appropriate discount rate was used and correctly applied in arriving at the present value of incentive fees which may potentially be paid in future years, on the basis that the NAV remains constant. As in previous years, the Audit Committee instructed CES Investments Ltd to perform an independent, full review of the relevant calculations. Following this exercise, the Audit Committee was satisfied that the assumptions used were appropriate and the calculations were accurate.

Effectiveness of the Audit

The Audit Committee held formal meetings with PwC CI before the start of the audit to discuss formal planning, to discuss any potential issues, to agree the scope that would be covered and, after the audit work was concluded, to discuss the significant issues which arose.

Following evaluation, the Audit Committee was satisfied that there had been appropriate focus and challenge on the significant and other key areas of audit risk and assessed the quality of the audit process to be good.

Audit fees and Safeguards on Non-Audit Services

The table below summarises the remuneration paid by the Company to PwC CI and to other PwC member firms for audit and non-audit services during the years ended 30 June 2022 and 30 June 2021.

The Audit Committee considers PwC CI to be independent of the Company. Further, the Audit Committee has obtained PwC CI's confirmation that the services provided by other PwC member firms to the wider VinaCapital organisation do not prejudice its independence with respect to its role as auditor of the Company.

Conclusion and Recommendation

On the basis of its work carried out over the year, and assurances given by the Investment Manager and the Administrator, the Audit Committee is satisfied that the Financial Statements appropriately address the critical judgements and key estimates (both in respect of the amounts reported and the disclosures). The Audit Committee is also satisfied that the significant assumptions used to determine the values of assets and liabilities have been appropriately scrutinised and challenged and are sufficiently robust. At the request of the Board, the Audit Committee considered and was satisfied that the 30 June 2022 Annual Report and Financial Statements were fair, balanced and understandable and that they provided the necessary information for shareholders to assess the Company's performance, business model and strategy.

PwC CI reported to the Audit Committee that no material misstatements, which required adjustment in the financial statements, were found in the course of its work. Furthermore, both the Investment Manager and the Administrator confirmed to the Committee that they were not aware of any material misstatements including matters relating to the presentation of the Financial Statements. The Audit Committee confirms that it is satisfied that PwC CI has fulfilled its responsibilities with diligence and professional scepticism.

Following the review process on the effectiveness of the independent audit and the review of audit and non-audit services, the Audit Committee has recommended that PwC CI be reappointed for the coming financial year.

Julian Healy

Audit Committee Chairman

24 October 2022

DIRECTORS' REMUNERATION REPORT

Directors' Remuneration Policy

The Board's policy is that the remuneration of the independent non-executive Directors should reflect the experience and time commitment of the Board as a whole and is determined with reference to comparable organisations and available market information each year.

The non-executive Directors of the Company are entitled to such rates of annual fees as the Board at its discretion shall from time to time determine. In addition to the annual fee, under the Company's Articles of Association, if any Director is requested to perform extra or special services, they will be entitled to receive such additional remuneration as the Board may think fit.

No component of any Director's remuneration is subject to performance factors.

The rates of fees per Director are reviewed annually, although these reviews will not necessarily result in any changes in remuneration. Annual fees are pro-rated where a change takes place during a financial year.

Limit on Aggregate Total Directors' Fees

At the AGM on 10 December 2018, a resolution was approved by shareholders to increase the maximum aggregate total remuneration to USD650,000.

Recruitment Remuneration Principles

1. The remuneration package for any new Chairman or non-executive Director will be the same as the prevailing rates determined on the basis set out above. The fees and entitlement to reclaim reasonable expenses will be set out in Directors' Letters of Appointment.

2. The Board will not pay any introductory fee or incentive to any person to encourage them to become a Director but may pay the fees of search and selection specialists in connection with the appointment of any new non-executive Director.

3. The Company intends to appoint only non-executive Directors for the foreseeable future.

Service Contracts

None of the Directors has a service contract with the Company. Non-executive Directors are engaged under Letters of Appointment and are subject to annual re-election by shareholders.

Loss of Office

Directors' Letters of Appointment expressly prohibit any entitlement to payment on loss of office.

Scenarios

The Chairman's and non-executive Directors' remuneration is fixed at annual rates, and there are no other scenarios where remuneration will vary unless there are payments for extra or special services in their role as Directors. It is accordingly not considered appropriate to provide different remuneration scenarios for each Director.

Statement of Consideration of Conditions Elsewhere in the Company

As the Company has no employees, a process of consulting with employees on the setting of the Remuneration Policy is not relevant.

Other Items of Remuneration

None of the Directors has any entitlement to pensions or pension-related benefits, medical or life insurance schemes, share options, long-term incentive plans, or performance-related payments. No Director is entitled to any other monetary payment or any assets of the Company except in their capacity (where applicable) as shareholders of the Company.

Directors' and Officers' liability insurance is maintained and paid for by the Company on behalf of the Directors. The Company has also provided indemnities to the Directors in respect of costs or other liabilities which they may incur in connection with any claims relating to their performance or the performance of the Company whilst they are Directors.

The Directors' interests in contractual arrangements with the Company are as shown in the Report of the Directors. Except as noted in the Report of the Directors, no Director was interested in any contracts with the Company during the period or subsequently.

Review of the Remuneration Policy

The Board has agreed that there would be a formal review before any change to the Remuneration Policy is made; and, at least once a year, the Remuneration Policy will be reviewed to ensure that it remains appropriate.

Shareholder approval of the Directors' Remuneration Policy

An ordinary resolution for the approval of the Directors' Remuneration Policy will be put to the shareholders at the AGM to be held on 5 December 2022. If this is approved, the directors intend to put forward a further resolution for approval of the Directors' Remuneration Policy not later than the Company's AGM in 2025.

Directors' Remuneration Implementation Report

For the year ended 30 June 2022, with one exception, Directors' individual annual remuneration remained the same as the previous year, the fees being USD105,000 for the Chairman and USD75,000 for the independent Directors, with USD5,000 for membership of the Audit Committee and USD15,000 for chairmanship of the same. Julian Healy receives an additional USD10,000 per annum to compensate for the additional work incurred as part of his role as an observer at meetings of the Investment Manager's Investment Committee. Mr Healy discontinued this role when he became Chairman of the Audit Committee, effective from 2 December 2021.

There are no long-term incentive schemes provided by the Company and no performance fees are paid to Directors.

Directors' Emoluments for the Year

The Directors over the past two years have received the following emoluments in the form of fees:

* On 2 December 2021, Steve Bates retired from his position as the Chairman of the Board and was succeeded by Huw Evans. Julian Healy was appointed as Chairman of the Audit Committee on the same date.

** On 30 June 2022, Hai Thanh Trinh was appointed as a member of the Board.

With effect from 1 July 2021, the annual fee for the position of Chairman of the Board increased from USD90,000 to USD105,000.

In addition, Directors were reimbursed for their expenses incurred in performance of their duties, including attendance at Board and Annual General Meetings.

Shareholder Approval of the Directors' Remuneration Implementation Report

An ordinary resolution for the approval of the Directors' Remuneration Implementation Report will be put to the shareholders at the AGM to be held on 5 December 2022. A similar resolution was put to the previous AGM in December 2021 and votes cast were as follows:-

Following a meeting of the Remuneration Committee on 30 June 2022 it was recommended that:

a) the additional USD5,000 for membership of the Audit Committee was not relevant, as all directors are members of the committee and therefore the basic directors' fee should change to USD80,000; and

b) there should be a supplement of USD5,000 per annum for the Chairs of the Remuneration and Management Engagement committees.

The proposed annual fee rates are then as set out in the table below and the only change will be the increases for the Chairs of the Remuneration and Management Engagement Committees:

These fees will be applicable for the year ended 30 June 2023 subject to shareholders' approval at the Meeting.

On behalf of the Board

Thuy Bich Dam

Chair

Remuneration Committee

24 October 2022

Independent auditor's report to the members of VinaCapital Vietnam Opportunity Fund Limited

Report on the audit of the financial statements

Our opinion

In our opinion, the financial statements give a true and fair view of the financial position of VinaCapital Vietnam Opportunity Fund Limited (the "company") as at 30 June 2022, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards and have been properly prepared in accordance with the requirements of The Companies (Guernsey) Law, 2008.

What we have audited 

The company's financial statements comprise:

● the statement of financial position as at 30 June 2022;

● the statement of comprehensive income for the year then ended;

● the statement of changes in equity for the year then ended;

● the statement of cash flows for the year then ended; and

● the notes to the financial statements, which include significant accounting policies and other explanatory information.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing ("ISAs"). Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence

We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements of the company, as required by the Crown Dependencies' Audit Rules and Guidance. We have fulfilled our other ethical responsibilities in accordance with these requirements.

Our audit approach

Overview

The scope of our audit

As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In particular, we considered where the directors made subjective judgements; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain, and we considered the risk of climate change and the potential impact thereof on our audit approach. As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters, consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the  financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters, and any comments we make on the results of our procedures thereon, were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. 

This is not a complete list of all risks identified by our audit.

How we tailored the audit scope

We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole, taking into account the structure of the company, the accounting processes and controls, and the industry in which the company operates.

Materiality

The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the financial statements as a whole.

Based on our professional judgement, we determined materiality for the  financial statements as a whole as follows:

We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our audit and the nature and extent of our testing of account balances, classes of transactions and disclosures, for example in determining sample sizes. Our performance materiality was 75% (2021:75%) of overall materiality, amounting to USD 13.3 million (2021: 15.3 million) for the company financial statements.

In determining the performance materiality, we considered a number of factors - the history of misstatements, risk assessment and aggregation risk and the effectiveness of controls - and concluded that an amount at the upper end of our normal range was appropriate.

We agreed with the Audit Committee that we would report to them misstatements identified during our audit above USD 0.885 million (2021:USD 1 million) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.

Reporting on other information

The other information comprises all the information included in the Annual Report and Financial Statements (the "Annual Report") but does not include the financial statements and our auditor's report thereon. The directors are responsible for the other information.

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report based on these responsibilities.

Responsibilities for the financial statements and the audit

Responsibilities of the directors for the financial statements

As explained more fully in the Statement of Directors' Responsibilities, the directors are responsible for the preparation of the financial statements that give a true and fair view in accordance with International Financial Reporting Standards, the requirements of Guernsey law and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or has no realistic alternative but to do so.

Auditor's responsibilities for the audit of the  financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing techniques. However, it typically involves selecting a limited number of items for testing, rather than testing complete populations. We will often seek to target particular items for testing based on their size or risk characteristics. In other cases, we will use audit sampling to enable us to draw a conclusion about the population from which the sample is selected.

As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

● Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

● Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company's internal control.

● Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.

● Conclude on the appropriateness of the directors' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the company's ability to continue as a going concern over a period of at least twelve months from the date of approval of the financial statements. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the company to cease to continue as a going concern.

● Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Use of this report

This report, including the opinions, has been prepared for and only for the members as a body in accordance with Section 262 of The Companies (Guernsey) Law, 2008 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Report on other legal and regulatory requirements

Company Law exception reporting

Under The Companies (Guernsey) Law, 2008 we are required to report to you if, in our opinion:

● we have not received all the information and explanations we require for our audit;

● proper accounting records have not been kept; or

● the financial statements are not in agreement with the accounting records.

We have no exceptions to report arising from this responsibility.

Corporate governance statement

The Listing Rules require us to review the directors' statements in relation to going concern, longer-term viability and that part of the corporate governance statement relating to the company's compliance with the provisions of the UK Corporate Governance Code specified for our review. Our additional responsibilities with respect to the corporate governance statement as other information are described in the Reporting on other information section of this report.

The company has reported compliance against the 2019 AIC Code of Corporate Governance (the "Code") which has been endorsed by the UK Financial Reporting Council as being consistent with the UK Corporate Governance Code for the purposes of meeting the company's obligations, as an investment company, under the Listing Rules of the FCA.

Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate governance statement is materially consistent with the financial statements and our knowledge obtained during the audit, and we have nothing material to add or draw attention to in relation to:

· The directors' confirmation that they have carried out a robust assessment of the emerging and principal risks;

· The disclosures in the Annual Report that describe those principal risks, what procedures are in place to identify emerging risks and an explanation of how these are being managed or mitigated;

· The directors' statement in the financial statements about whether they considered it appropriate to adopt the going concern basis of accounting in preparing them, and their identification of any material uncertainties to the company's ability to continue to do so over a period of at least twelve months from the date of approval of the financial statements;

· The directors' explanation as to their assessment of the company's prospects, the period this assessment covers and why the period is appropriate; and

· The directors' statement as to whether they have a reasonable expectation that the company will be able to continue in operation and meet its liabilities as they fall due over the period of its assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions.

Our review of the directors' statement regarding the longer-term viability of the company was substantially less in scope than an audit and only consisted of making inquiries and considering the directors' process supporting their statements; checking that the statements are in alignment with the relevant provisions of the Code; and considering whether the statement is consistent with the financial statements and our knowledge and understanding of the company and its environment obtained in the course of the audit.

In addition, based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate governance statement is materially consistent with the financial statements and our knowledge obtained during the audit:

· The directors' statement that they consider the Annual Report, taken as a whole, is fair, balanced and understandable, and provides the information necessary for the members to assess the company's position, performance, business model and strategy;

· The section of the Annual Report that describes the review of effectiveness of risk management and internal control systems; and

· The section describing the work of the Audit Committee.

We have nothing to report in respect of our responsibility to report when the directors' statement relating to the company's compliance with the Code does not properly disclose a departure from a relevant provision of the Code specified under the Listing Rules for review by the auditors.

Evelyn Brady

For and on behalf of PricewaterhouseCoopers CI LLP

Chartered Accountants and Recognised Auditor

Guernsey, Channel Islands

24 October 2022

STATEMENT OF FINANCIAL POSITION

The Financial Statements were approved by the Board of Directors on 24 October 2022 and signed on its behalf by:

Huw Evans Julian Healy

Chairman Director

The accompanying notes are an integral part of these Financial Statements.

STATEMENT OF CHANGES IN EQUITY

The accompanying notes are an integral part of these Financial Statements.

STATEMENT OF COMPREHENSIVE INCOME

All items were derived from continuing activities.

The accompanying notes are an integral part of these Financial Statements.

STATEMENT OF CASH FLOWS