Annual Report 2019

INVESTMENT MANAGER’S DISCUSSION AND ANALYSIS (CONTINUED) China Merchants China Direct Investments Limited Annual Report 2019 19 REVIEW OF INVESTMENTS (CONTINUED) On 31 October 2019, Oriental Pearl announced that its unaudited net profit for the first three quarters of 2019 was RMB1.31 billion, down 13.26% as compared to the same period last year, due primarily to changes in the profit sharing model of the Internet TV business and adjustments to the sales model of its Internet business. Meanwhile, the film and television entertainment business recorded a decrease in income as a result of the flat performance of the TV series industry since the beginning of the year. On 27 August 2019, Oriental Pearl and Shanghai Information Investment Inc. (“ Shanghai Information ”) entered into an equity transfer agreement in relation to Oriental Cable Network Co., Ltd. (“ Oriental Cable ”), pursuant to which Oriental Pearl acquired a 2% equity interest in Oriental Cable, previously held by Shanghai Information, at a price of approximately RMB100 million. Upon completion of the equity transfer, Oriental Pearl will hold a 51% equity interest in Oriental Cable while Shanghai Information will hold the remaining 49% equity interest. Oriental Cable will therefore become a subsidiary controlled by Oriental Pearl and will actively participate in the construction of 5G broadcasting networks. On 25 November 2019, Shanghai Oriental Pearl Industrial Development Co., Ltd. (“ Pearl Industrial ”), a wholly- owned subsidiary of Oriental Pearl, and SMG entered into a contract for the transfer of a 100% equity interest in Shanghai Science & Educational Film Studio Co., Ltd. (“ Science Film Studio ”), pursuant to which Pearl Industrial acquired a 100% equity interest in Science Film Studio, previously held by SMG, at a price of approximately RMB280 million. Through this acquisition, it is expected that Oriental Pearl will obtain quality land property rights and achieve a stable and reliable stream of investment income, which is conducive to enhancing the corporate brand and facilitating the development of its principal business of new media. Yunnan Jinlanmei International Travel Investment Development Co., Ltd. (“Jinlanmei Travel”) was established in Mengla County, Xishuangbanna Dai Autonomous Prefecture, Yunnan in 2016, with registered capital of RMB100 million. Based in Yunnan, Jinlanmei Travel will seek to establish a global presence and engage broadly in the operation of tourism and shipping within the territorial waters of the Lancang/Mekong River. Jinlanmei Travel was established jointly by the Fund and Shanghai-listed Yunnan Metropolitan Real Estate Development Co., Ltd. (“ Yunnan Metropolitan ”), among others, with stakes of 20% and 35%, respectively. In October 2016, the Fund completed the first capital contribution of RMB10 million (equivalent to US$1.49 million) to Jinlanmei Travel. As of the end of 2019, the carrying value of the Fund’s interest in Jinlanmei Travel was US$0.85 million, representing a decrease of 23.42% from the value at the end of last year of US$1.11 million. Jinlanmei Travel convened a shareholders meeting in June 2019. At the meeting, the shareholders of the company reached a decision to make the second registered capital contribution of RMB50 million by the end of August 2019 in accordance with the capital contribution agreement signed in 2016. Pursuant to this decision, the Fund completed its second capital contribution of RMB10 million in August 2019. However, other shareholders (including Yunnan Metropolitan) did not meet this deadline due to failure to pass through their respective internal approval processes. Hence, Jinlanmei Travel refunded the capital contribution of RMB10 million in December 2019, as requested by the Fund.