Interim Results 2011 (1393H)

TIDMVOC

RNS Number : 1393H

Vision Opportunity China Fund Ltd

24 May 2011

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART INTO THE UNITED STATES, CANADA, AUSTRALIA, SOUTH AFRICA OR JAPAN

24 May 2011

Vision Opportunity China Fund Limited (the "Company" or "VOC")

Unaudited Interim Results for the six months ended 31 March 2011

Vision Opportunity China Fund Limited (AIM: VOC.L), the closed-ended fund traded on AIM that invests in companies with operations principally within Greater China, today reports its unaudited interim results for the six months ended 31 March 2011.

Financial Summary as at 31 March 2011

-- Net Asset Value (NAV) of US$74.3 million (US$139.3 million as at 30 September 2010)

-- NAV per share of US$1.138 (US$2.105 as at 30 September 2010)

-- Cash and near cash levels of US$11.5 million generated through a series of realisations including;

- Proceeds of US$6.4 million raised from the partial sale of China Security & Surveillance Technologies (CSR)

- Proceeds of US$5.1 million raised from the partial sale of China Integrated Energy (CBEH)

Sector Performance

-- Challenging period for US-listed Chinese companies which has affected VOC's portfolio

-- Number of reports have exposed misrepresentation, self-dealing and fabrication of financial results in the sector

-- US-listed China sector remains under pressure with volatility in the sector expected going forward

Activities Post Period End

-- Cash and near cash levels of US$23.4 million (as at 20 May 2011)

-- 82.1% of Company's total investment in CBEH realised. Value of remaining position in CBEH marked down to zero

-- Completed sale of CSR for total proceeds of US$10.2 million, representing an IRR of 41%

-- Company's portfolio consists of three major positions, six minor positions and cash (as at 20 May 2011)

Investment Strategy

In view of the Company's more recent performance, the uncertain outlook for smaller US-listed Chinese companies and in the interest of shareholders, the Board is recommending that the Company should not make any new investments, seek to realise its remaining investments in an orderly fashion and return surplus cash to shareholders from time to time.

This will constitute a material change to the Company's investment policy and, as such, requires to be approved by shareholders (in the form of an ordinary resolution). The Board will convene an extraordinary general meeting to seek such approval as soon as practicable and, in the meantime, no further investments will be made by the Company.

Chris Fish, Chairman of the Company, commented:

"The underlying performance of the portfolio has continued to be materially impacted by the challenging conditions facing the US-listed Chinese market. Despite the hard work and ongoing commitment shown by the Company and Investment Manager, we expect continued volatility in the sector going forward. The priority of the Board will now turn to maximising shareholder value, through the orderly realisation of the Company's investments and return of surplus cash to shareholders."

For further information, please contact:

Vision Opportunity China Fund Limited

David Benway / Adam Benowitz Tel: [phone]

Canaccord Genuity Limited Tel: [phone]

Sue Inglis / Guy Blakeney

Financial Dynamics Tel: [phone]

Ed Gascoigne-Pees / Ed Berry

NOTE TO EDITORS

Vision Opportunity China Fund Limited is a closed-ended listed fund traded on AIM. VOC primarily invests directly in listed companies with operations principally within Greater China.

Greater China is a collective term for the territories administered by the People's Republic of China, those administered by the Republic of China and Singapore.

CHAIRMAN'S STATEMENT

Period ended 31 March 2011

The half-year period ending 31 March 2011 has been an extremely difficult one for the Company and, while this has certainly been a challenging time for US-listed Chinese companies generally (especially smaller ones), VOC's portfolio has been particularly affected. In recent months, there have been a number of reports, some by anonymous short-sellers, looking to expose frauds among US-listed Chinese companies and, indeed, a number of these reports have successfully uncovered several significant instances of misrepresentation, self-dealing and outright fabrication of financial results.

One of VOC's major holdings, China Integrated Energy (CBEH), was accused, among other things, of having falsely reported the level of sales of its biodiesel products. As will be discussed in the Investment Manager's statement, in response to the allegations, the Manager launched its own investigation and, though CBEH publicly denied the charges, VCA was unable to restore its prior confidence in the investment. As a result, the Investment Manager made the decision to sell. Having invested a total of $14.7 million over the life of the fund, the Investment Manager was able to sell substantially all of the Company's holding in CBEH before trading in the CBEH shares was halted by NASDAQ on 20 April 2011, realising US$12.0 million in total (US$5.1 million during the six months ending 31 March 2011 and US$1.8 million in April).

Although the Company retains a small investment in CBEH, having considered the allegations against CBEH, the suspension of trading of its shares, the resignations of Deloitte and the other firms appointed by CBEH as special advisers to conduct an investigation into the allegations, the independent director serving as CBEH's audit committee chairman and of CBEH's auditors due to CBEH management's unwillingness to cooperate fully with the special advisers' investigation and KPMG's statement that CBEH's financial statements and audit reports for the financial year ended 31 December 2010 should no longer be relied upon, the value of this investment was written down to zero with effect from 30 April 2011. Taking into account the original cost of the entire CBEH holding and the write down of the value of the remaining holding, the Company sustained a loss of 17.9% on this investment.

Whilst the smaller US Chinese listed companies appear extremely cheap relative to their US counterparts, this reflects the market's sentiments towards these companies and there are no signs of the market's confidence being restored in the short to medium term.

Performance

As at 31 March 2011, the Company had net assets of US$74.3 million which equates to a NAV per share of US$1.138, a decrease of 45.9% since 30 September 2010 (net asset value of US$2.105 per share). This performance is very disappointing and only partly driven by the collapse of CBEH. Certainly, the concentrated nature of the portfolio was a contributing factor. Liquidity of the major portfolio company shares has remains thin during this difficult period, and as such sales of all or substantial parts of the Company's larger holdings in the short term are likely to be value destructive.

Investment Strategy

As at 31 March 2011, the Company had built up cash and near cash of US$11.5 million through a series of realisations. Further realisations have been achieved since the period end and cash and near cash (as at 20 May 2011) stands at US$23.4 million. In view of the Company's more recent performance, the uncertain outlook for smaller US-listed Chinese companies and shareholder feedback, the Board is recommending that the Company should not make any new investments, seek to realise its remaining investments in an orderly fashion and return surplus cash to shareholders from time to time. This will constitute a material change to the Company's investment policy and, as such, requires to be approved by shareholders (in the form of an ordinary resolution).

The Board will convene an extraordinary general meeting to seek such approval as soon as practicable (and, in the meantime, no further investments will be made by the Company). The Board also expects to make an announcement shortly confirming the arrangements for returning the current surplus cash.

The Investment Manager is currently entitled to 12 months' notice of termination of its appointment. However, in view of the proposed change to the Company's investment policy referred to above, protective notice has been agreed with the Investment Manager and will expire on 31 March 2012, or as such later date as the Board may deem appropriate.

Conclusion

The Board shares shareholders' disappointment and frustration at the reversal in VOC's fortunes. As a Board, our goal is now to seek to achieve an appropriate balance between maximising value for shareholders from our remaining investments and achieving profitable exits from those investments.

Christopher Fish

Chairman

Vision Opportunity China Fund Limited

Date: 23 May 2011

INVESTMENT MANAGER'S REPORT

Period ended 31 March 2011

Portfolio Review

The Company had net assets of US$74.31 million as at 31 March 2011 (US$1.138 per share), including investments in 12 portfolio companies and $11.9 million in cash and other short term holdings. This represents a decline from the levels on 30 September 2010, when the Company had net assets of US$139.31 million (US$2.105 per share). The portfolio remains highly concentrated with the top 5 holdings accounting for 90.6% of the portfolio at the end of the period.

Performance

The first six months of FY2011 have been understandably disappointing for shareholders. Without a doubt, the allegations of widespread fraud among US-listed Chinese companies have placed unprecedented pressure on the sector. In the current environment, portfolio company share prices have been deeply affected and, as such, NAV has been greatly reduced. Liquidity, when available, is generally at much lower price levels and, as such, realisations, if achievable at all, often come with a heavy price tag.