Annual Report 2023

20 20 China Merchants China Direct Investments Limited Annual Report 2023 INVESTMENT MANAGER’S DISCUSSION AND ANALYSIS (CONTINUED) REVIEW OF INVESTMENTS (CONTINUED) 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. (“ YM Real Estate ”), among others, with stakes of 20% and 35%, respectively. In October 2016, the Fund completed the capital contribution of RMB10 million (equivalent to US$1.49 million) to Jinlanmei Travel. In July 2021, YM Real Estate, the single largest shareholder of Jinlanmei Travel, transferred its 35% stake in Jinlanmei Travel to its related party, Yunnan Kangqi Enterprise Management Co., Ltd. As of the end of 2023, the carrying value of the Fund’s interest in Jinlanmei Travel was US$0.40 million, representing a decrease of 36.51% from the value at the end of last year of US$0.63 million. The tourism industry in Xishuangbanna has continued to be affected by the coronavirus pandemic over the past three years, which has had an adverse impact on the company’s operations. Although pandemic control measures had been relaxed during 2023, the company’s business was still in the process of a slow recovery. The company continues to make adjustments to its operational strategy, while also actively seeking external strategic investors as a source of financial support. Qinghai Provincial Qinghai Lake Tourism Group Co., Ltd. (“Qinghai Lake Tourism”) was established in Xining, Qinghai in 2008. It is a tourism operator with a focus on Qinghai Lake, a national 5A-class scenic spot, and is principally engaged in product development, business operations and provision of services related to tourism in Qinghai Lake and the surrounding regions. The Fund agreed to advance cash of RMB200 million in total to Qinghai Lake Tourism for a period of 3 years, with the right to convert the loan into an equity interest in Qinghai Lake Tourism during the term of the loan, subject to the fulfillment of certain precedent conditions. In August and September 2017, the Fund disbursed RMB50 million (equivalent to US$7.50 million) and RMB150 million (equivalent to US$22.93 million), respectively, amounting to RMB200 million (equivalent to US$30.43 million) in aggregate. Pursuant to a supplemental agreement to the convertible loan agreement entered into between the Fund and Qinghai Lake Tourism dated 9 May 2019, the Fund had received aggregate loan repayments of RMB200 million from Qinghai Lake Tourism before the end of 2020, representing a full recovery of the loan made by the Fund. The Fund entered into a letter of confirmation with Qinghai Lake Tourism with respect to an extension of interest payments on 22 January 2021, pursuant to which Qinghai Lake Tourism might postpone the payment of interest due for the loan of RMB200 million to 30 June 2022. In addition, if Qinghai Lake Tourism underwent a shareholding restructuring during the period, the Fund reserved the right to convert an amount up to RMB200 million into shareholding under the above supplemental agreement, at its sole discretion. Given that the coronavirus pandemic has affected the normal development of Qinghai Lake Tourism over the past three years, the Fund is considering a further extension of interest payments by Qinghai Lake Tourism. The Fund is still in discussion with Qinghai Lake Tourism about the specific terms of the extension, which will be formalised by a new letter of confirmation. As of the end of 2023, the carrying value of the Fund’s debt in Qinghai Lake Tourism was US$5.35 million, representing an increase of 1.13% over US$5.29 million at the end of last year.