First write 0x03d7 in binary:

      0000 0011 1101 0111 (but this is 16 bits, so discard left 2 bits)
   

and partition the bits into the VPN and VPO parts:

         VPN      VPO
       00001111 010111
   

Now convert VPN and VPO back to hex

      VPN = 0000 1111 = 0x0F
      VPO =   01 0111 = 0x17